Dubai’s residential property market has been hit by a 10 per cent slump in sales as the city suffers the effects of a strong US dollar and tightening liquidity.
A report by JLL found that the rental index had also declined at a slower rate of 5 per cent year-on-year during the first quarter of 2016.
During the same period, 2,200 residential units have been added to the market, taking the total stock to 458,500 units. These include a range of apartments, villas, as well as town houses across the emirate.
However, the report found retail to be performing well with a 92 per cent occupancy rate and a surge of new developments on Al Wasl Road and Umm Suqeim.
In terms of office space, two new towers in Business Bay have contributed to an increase of 38,400 sq m in space, while more than 500,000 sq m is scheduled to be delivered over 2016 and 2017. However, the sector continued to perform badly when compared to the other areas.
But JLL emphasised that it “continued to remain cautious in terms of handover timings”.
JLL’s head of research Craig Plumb said: “Various factors are bringing the market towards the bottom of its cycle. On one hand, the strong dollar is impacting the USD pegged GCC currencies which is making Dubai real estate more expensive for buyers from non-USD pegged markets. On the other hand, the continued period of low oil prices is tightening regional liquidity which is also affecting the real estate market.
“We are witnessing a continuing decline in the sales and rental indexes for both the Dubai residential and hospitality sector. Although occupancy rates are still considered high, but average rates continue to drop.
“However, our outlook for the retail sector is positive for most part of this year, despite a flat performance during the first quarter. We expect additional retail supply to enter the market during the second half of this year.
“The office market continues to be the worst performing sector and has been has been stuck at the bottom of the cycle for a number of years. Nevertheless, we are witnessing some select activity and momentum for Grade A office buildings which continue to generate strong demand.”