Cities across the United Arab Emirates continued to see price and rental declines for residential property during the third quarter, according to Asteco.
The firm’s latest report, released on Wednesday, showed villa and apartment rents in Dubai down 3 and 2 per cent since the end of June, with areas that recorded high handover volumes seeing the sharpest declines and tenant turnover.
Sales prices were down 5 per cent during the period as a result of new supply and limited “if not negative” business and employment growth, the firm said.
“Rental rates across all asset classes are expected to come under further pressure this year, and this trend is likely to spill over into early 2019,” said Asteco managing director John Stevens.
In neighbouring Abu Dhabi, villa rents were down 1 per cent and apartment rents 3 per cent since Q2, linked to new supply and reduced demand “largely attributed to a bearish business outlook” Stevens said.
Apartment sales prices were down 1 per cent.
Al Ain saw relatively stable rents during the same period for apartments but a 2 per cent decline for villas. Apartment rents were down 6 per cent year-on-year.
In the northern Emirates, average quarterly rents declined 6 per cent in Ras Al Khaimah and Ajman, 3 per cent in Sharjah and Fujairah and 1 per cent in Umm Al Quwain.
“Due to the rise of master-planned communities and large-scale developments, concerns about a possible oversupply scenario in the future are starting to emerge,” Stevens said of Sharjah.
Asteco noted a substantial delay in project handovers in Dubai, linked to delays and “overly ambitious” schedules.
Many units forecast for delivery in the second half of 2018 are now expected in 2019 but Q3 did see 3,850 new apartments and 570 villas and townhouses added to Dubai’s inventory.
This pushed the total for the year to 12,000 residences handed over.
Stevens said real estate stakeholders had been increasingly vocal in asking for changes to mortgage rules, which mean foreign first-time buyers of a home worth up to Dhs5m ($1.36m) can only borrow up to 75 per cent of a property’s value.
Although no such changes have been announced at the time of compiling the report, there appears to be a consensus that such a reform would provide a much-needed stimulus to the property market.”
Reuters reported this week that members of the UAE Banks Federation was considering a request to the government for mortgage rules to be eased.
Credit ratings agency S&P said in a February report that it expected Dubai’s real estate slump to continue for another two years.