Dubai’s rapidly growing real estate market has finally put some brakes on, with a new report by real estate investment and advisory firm JLL suggesting that the market levelled off in the third quarter of 2014.
According to the report, while residential property values in Dubai increased over the past year, the third quarter saw more subdued growth levels in both apartment and villa sale prices and rents. Average rents and sale prices grew by just 2 per cent and 1 per cent respectively in Q3 2014, down from 3 per cent and 6 per cent in Q2.
Factors behind this cooling off include tighter government regulations and an increasing mismatch between buyer and seller expectations, the report said.
“The broad based recovery witnessed in the residential sector over the past 18 months has now slowed down, as rental prices and sale values have stabilized in most locations,” said Craig Plumb, head of research at JLL MENA.
“While new projects continue to be announced, these have no immediate impact on supply as they are phased over a longer timeframe.”
Plumb added that although the hotel sector underperformed over the month of July, registering 50 per cent occupancy rates, it is expected to trend upwards into the peak season in the last quarter of the year.
“Elsewhere in the market, the retail segment maintained its solid growth while the recovery of the office sector remains patchy, as high levels of supply continue to constrain the market,” said Plumb.
On the office sector, the report highlighted that while the prime CBD rents stayed stable over the quarter, they are expected to increase as demand remains strong for Grade A office space.
However, rents in secondary locations are expected to remain under downward pressure as more Grade A office space enters the market by 2015, it revealed.