Dubai residential apartment and villa rental rates and sales prices continued to decline in the second quarter with further reductions expected over the next three months, according to real estate firm Asteco.
The firm’s report indicated that apartment and villa rental rates declined 3 per cent and 2 per cent respectively during the quarter and 12 per cent and 10 per cent year-on-year.
Particularly large declines were seen for apartments in Jumeirah Village Circle (16 per cent), Jumeirah Beach Residence (15 per cent) and Jumeirah Lakes Towers, Deira and Discovery Gardens (14 per cent) compared to the same period in 2017.
Jumeirah Park and Jumeirah Village (15 per cent), followed by Arabian Ranches (11 per cent) saw the largest declines in the villa market.
“Vacancy levels across multiple projects rose due to the supply of additional inventory. Properties with proactive management and maintenance teams succeeded in maintaining steady occupancy rates, while landlords offering discounts and additional incentives also achieved solid tenant retention,” said Asteco managing director John Stevens.
“Over the next quarter, we expect further gradual but consistent softening in rental rates for all asset classes.”
Apartment and villa sales prices were down 4 per cent over the quarter and 11 per cent over the year, according to Asteco.
For apartments, the largest rates declines were seen in Dubai International Financial Centre, Discovery Gardens and Dubai Sports City, down 6 per cent since Q1.
For villa the highest quarterly drops were in Jumeirah Park (8 per cent), Arabian Ranches (5 per cent) and The Springs (5 per cent).
Asteco said sales activity remained steady, despite an overall bearish outlook from investors and end users, due to new project launches with attractive payment plans.
Launches in the quarter included Amaranta 3 and Tilal Al Ghaf Phase 1 in Dubailand, as well as Zawaya – a mixed-use community in Motor City, and Belgravia Heights I & II in Jumeirah Village Circle (JVC).
“Generally, new developments focused on the affordable segment, resulting in a marginally more noticeable quarterly drop in sales prices at 5 per cent, compared to 3 per cent for mid- and high-end properties,” said Stevens.
Recent figures from Dubai Land Department showed the value of sales transactions and agent commissions falling in the first half of the year.
Similar to the first three months of the year, there were 3,400 residential units handed over in the second quarter, Asteco said, with the majority located on the corridors of Sheikh Mohammed bin Zayed road and Emirates Road.
A further 25,000 unit are scheduled for delivery by year-end, after the firm revised its supply projections for residential and office space down 17 per cent and 20 per cent respectively due to lower than expected handover voluems and project delays.
Completed office space during the quarter included the 320,000sqft HSBC headquarters in Downtown Dubai and the 440,000sqft third building of the One Central project in the Trade Centre area.
Stevens said infrastructure investment and government incentives, including a new 10-year visa for investors and specialists and the freezing of school fees, should boost the market going forward.
“The UAE has always been a real estate investment haven, and the new laws will attract an untapped pool of international investors seeking a tolerant country with deep-rooted values to call home,” he added.
Credit ratings agency S&P said in a February report that it expected Dubai’s real estate slump to continue for another two years.