How the Dubai real estate market evolved in 2017
Off-plan sales revived sentiment and an abundance of supply opened the doors for affordable opportunities
2017 was a year of change in the Dubai real estate market, where we witnessed real estate trends transform to new and refreshing positions, off-plan sales revive market sentiment and an abundance of supply open the doors for many affordable opportunities in the sales market and offer more options and lower rents in the rental market.
More affordable properties
The current momentum in sales activity is driven by a larger proportion of end-users than before, particularly first-time buyers, who are entering the market enthused by lower prices and encouraged by attractive payment plans offered by some developers.
Off-plan sales has dominated 2017, accounting for 68 per cent of all sales transactions to date and has increased by 55 per cent year on year. As of November 27, there have been 18,657 off-plan apartment sales transactions. The most popular unit types for off-plan apartment sales were one-bedrooms, accounting for 39 per cent of these sales transactions and studios accounting for 36 per cent of the transactions.
As per the Property Monitor database, the top five areas for off-plan apartment sales to date are (in order):
> Jumeirah Village Circle covering 11 per cent of the transaction volume with the top three projects being Ghalia Constella, Belgravia and Bloom Heights.
> Business Bay covering 11 per cent of the transaction volume with the top three projects being Aykon City, Bayz by Danube and Damac Towers by Paramount.
> Downtown Burj Khalifa covering 10 per cent of the transaction volume with over 1,500 units sold in the Downtown area and over 300 units sold in the Opera District.
> Al Furjan covering eight per cent of the transaction volume with the top three projects being Azizi Residence, Azizi Plaza Serviced Apartments and Roy Mediterranean Serviced Apartments.
> Dubai South covering eight per cent of the transaction volume with the top three projects being The Pulse, Mag 5 Boulevard and Emaar South.
To date, there have been 3,957 off-plan villa/townhouse transactions. The most popular types were three-bedrooms, accounting for 54 per cent of the transactions and two-bedrooms accounting for 24 per cent of the transactions.
As per the Property Monitor database, the top five areas for off-plan villa/townhouses sales to date are (in order):
> Town Square covering 31 per cent of the transaction volume.
> Arabian Ranches 2 with 27 per cent of the transaction volume.
> Dubai South with 18 per cent of the transaction volume.
> Mohammed Bin Rashid City with 11 per cent of the transaction volume.
> Reem Mira with 3.6 per cent of the transaction volume.
The secondary market accounted for 32 per cent of the sales transactions in 2017. Prices in established communities with limited upcoming supply have held stronger than emerging locations even as marginal price declines continue. One of the main reasons sales activity in the secondary market has been low this year is due to prices still trading at a premium and sellers not very motivated to negotiate. However, in Q4, sellers have started to budge on their pricing which has caused an increase in secondary sales.
According to Lewis Allsopp, CEO of Allsopp & Allsopp: “From our statistics this year, we can see that our average sale price has been at Dh2,566,709 and that 55 per cent of our buyers have been ‘end-users’ and 45 per cent buying for investment. We can also see that 52 per cent of purchases have been made using a mortgage. The type of properties that we have seen the most activity in this year are apartments and small villas, which fits the profile perfectly of a first-time buyer.”
This year, we have seen the shift in power from the landlord to the tenant. Due to new supply, rent declines for residential properties in Dubai have been more pronounced than sales price declines over the last 12 months.
According to Property Monitor’s database of rental contracts, no area or property type was immune to the declining trend. Areas with more supply are obviously impacted higher but other established, mid-market locations are also affected as consumers are shifting and opening their options to areas they never considered before. With new supply coming into the market in suburban communities, we are seeing tenants shift from established communities to like-for-like product in suburban communities at a cheaper price over multiple cheques. According to Property Monitor, four cheques annually are now the average, with 42 per cent of villa/townhouse contracts negotiated with four cheques and 54 per cent of apartment contracts were done with four cheques.
According to the Property Monitor Supply Tracker, which tracks supply in real time, there are a little over 13,000 units expected to be completed by end of the year. A majority of these projects will most likely get pushed to Q1 2018. However, there are quite a few projects which are looking to be very near completion in Al Quoz, Business Bay, Jumeirah Village Circle, Sports City, Al Furjan and Town Square.
According to the Property Monitor Supply Tracker, in 2018, over 40,000 units are expected to be completed. The areas with most supply expected to be completed in 2018 are:
> Mohammed Bin Rashid City with over 3,800 units.
> Jumeirah Village Circle and Al Furjan, each with over 3,700 units.
> Damac Hills with over 3,200 units.
> Town Square with over 2,500 units.
> Akoya Oxygen with over 2,900 units.
> Deira with over 2,100 units.
> Dubai Marina with over 2,400 units.
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