Source : Me construction News
International property company Chestertons MENA claims the addition of new stock, tough macroeconomic conditions and moderate population growth will place further pressure on property sales prices and rental rates in Dubai.
The firm revealed that overall sales prices for apartments and villas softened by 5% quarter-on-quarter, denoting the highest quarterly drop in sales prices for apartments since 2014, while rental rates for apartments and villas fell by 2%, with the Greens, a “standout performer” in recent years, falling by 4%. The villa market, notably Palm Jumeirah also fell by 4%, it said.
“As a result of falling sales prices, many end users took advantage of the increased affordability of completed units, as evidenced by the 10% increase in recorded transactions from the previous quarter. This was to the detriment of off-plan transactions, which although they still dominate the market, volume declined by 19%,” commented Ivana Gazivoda Vucinic, head of Consulting and Valuations and Advisory Operations, Chestertons MENA.
The most popular areas in terms of completed unit transaction volumes were Dubai Marina (449 units sold), Dubai Sports City (396) and International City (274) whereas the majority of off-plan units transacted were located in Business Bay (748), Meydan City (581) and Jumeriah Village Circle (519), reported Chestertons MENA.
In terms of apartment sales, Business Bay and Silicon Oasis saw the steepest declines at 9% with prices dropping to AED1,178 and AED 729 respectively per sqft. Dubai Sports City, Jumeriah Village Circle and The Greens witnessed a drop of 8% with prices declining to AED957, AED824 and AED1,095 respectively per sqft. Dubai Land proved to be the most resilient community with a drop of just 1%, owing to the relative affordability of the area. In the villa sales market, all communities experienced falling prices, with Palm Jumeirah and the Meadows and Springs recording capital depreciation of 8% to AED2,205 and AED988 per sqft respectively. The Lakes dropped by 6% to AED1204 per sqft while Arabian Ranches fell to AED942.
“The number of new launches dropped during the quarter, which appears to be a strategic decision by developers in a bid to stave off empty units or sales at reduced-price points. However, with a substantial pipeline of stock due to be released ahead of Expo 2020, sales prices are expected to drop further this year,” added Vucinic.
In the rental market, the consultancy reported that Q1 declines were “evenly spread” across different unit types, contrasting with previous quarters where the declines were most prominently felt in larger units.
From an apartment perspective, The Greens witnessed the “greatest decline in rental rates,” dropping 4% with a one-bedroom unit available for AED 79,000 per annum. This was closely followed by Business Bay, International City, Jumeirah Village Circle and Motor City, all of which declined by 3% with the cost of annual renting a one-bedroom apartment for the year at AED 82,500, AED 40,500, AED 60,000 and AED 74,000 per annum respectively.
Villa rents saw the highest decline in Palm Jumeirah at 4% followed by a 3% decline in Arabian Ranches and Victory Heights. Jumeriah Golf Estates was the only community not to witness any decline. A two-bedroom villa in Arabian Ranches is priced at AED130,000; in The Springs the price is AED120,000; in Al Furjan the price is AED125,000; and in Jumeriah Village Triangle the cost per annum is AED140,000. For five-bedroom properties, Palm Jumeirah, Jumeirah Golf Estates and Jumeriah Islands were the most expensive at AED425,000, AED390,000 and AED350,000 respectively.
“The decline in rental rates has been partly due to the additional stock added to the market in the last quarter, in addition, due to falling sales prices, we have seen a number of expatriates choosing to become a home owner which in turn is naturally having an adverse impact on the rental market,” said Vucinic.