Dubai residential property rents declined by up to 5 per cent year-on-year in the first quarter with a similar slump expected over the next three months, according to Cavendish Maxwell.
The property consultant said data from its Property Monitor site showed rents declined at a more pronounced rate than sales (down 2 per cent on average) during the first quarter, resulting in yield compression in most communities.
Among the factors impacting the market was deemed to be smaller housing allowances paid to workers and a shrinking pool of tenants at the higher end of the market.
Of the sales conducted during the quarter 61 per cent were off-plan, continuing a trend of off-plan sales dominance seen last year.
Going forward the government has sought to improve regulation of the market by making developers complete 50 per cent of a project before beginning off-plan sales, according to reports in February.
Cavendish said roughly 3,800 units were handed over the first three months of the year.
A separate survey conducted by the firm revealed that the majority of agents are predicting that apartment and villa rents will decrease by up to 5 per cent in the second quarter.
For the coming three months, 42.4 per cent of agents predicted an increase in new buyer enquiries and 55.6 per cent expected an increase in new seller instructions.
In a separate Q1 report, JLL said that the major theme of the quarter was affordability across the residential, retail, office and hotel sectors.
Tenants for offices in particular were said to remain “cautious and cost conscious” while continuing to seek smaller units and the market’s previous strongest sector retail saw rents decline as brands vacated underperforming stores.
“Dubai’s real estate market has adjusted to more negative market sentiment in Q1 2018, resulting in developers focusing more on affordable options across all segments of real estate,” said JLL MENA’s head of research Craig Plumb.
“With rents continuing to fall across the office and residential sectors, building owners and landlords are increasingly looking to incentivise in order to retain current tenants and have done so by setting more competitive prices and more attractive lease terms.”
The reports follow a forecast by ratings agency S&P released in February that indicated Dubai’s property slump would continue for at least another two years.
S&P said prices and rents had declined the 5-10 per cent it expected last year and were likely to continue their downward shift for the foreseeable future.
“We believe this correction will continue at least for this year and next, before prices stabilise in 2020 at the earliest,” the firm indicated.