Off-plan properties accounted for 73 per cent of overall sales volumes in Q3
The rise in residential off-plan property sales in Dubai may now delay the recovery of the overall market, according to a new report by ValuStrat.
The majority of residential transactions in the third quarter of the year came from the sales of off-plan properties, accounting for 73 per cent of overall sales volumes, the report found.
In terms of total transaction value, Dhs37.6bn was invested in residential properties during the first nine months of this year,
Dhs23.5bn of which was off-plan.
Year-to-date, off-plan values are 26 per cent higher than the whole of 2015 and 3 per cent higher than all of 2016.
Key locations for off-plan sales included Downtown Dubai (88 per cent), Business Bay (83 per cent), Dubai Silicon Oasis (82 per cent) and Jumeirah Village (78 per cent).
“An exponential rise in sales of off-plan projects due for completion pre-Expo 2020, some in established locations, may now
delay an expected near-term overall market recovery,” the report stated.
The growth in off-plan sales is causing a slowdown in price recovery across established areas, it added.
Residential sales prices declined by an average of 1.2 per cent year-on-year in Q3, equivalent to 14.6 per cent below 2014 peaks, the report found.
However, price appreciation was seen in established prime locations such as Downtown Dubai, Palm Jumeirah (villas) and Emirates Hills, with values increasing by between 1.8 per cent – 8.1 per cent annually.
The median residential transacted price declined by 3.4 per cent year-on-year and 4.2 per cent quarter on quarter. The average rate for ready apartments stood at Dhs1,046 per sq ft, down 3.4 per cent compared to Q3 2016, and at Dhs1,053 per sq ft for villas, down 4 per cent year-on-year.
Declan King, managing director and group head of Real Estate at Valustrat said: “The new homes market has seen increased activity – with many developers working to diversify away from the high-end luxury segment that Dubai is well known for, broadening into a burgeoning affordable homes sector and new locations to the south and east of the city.
“Buyers have been attracted away from older second-hand properties with modern specification, lower price points, attractive payment plans and hoped-for appreciation during the pre-handover build period. This trend is now evident in transaction statistics and is impacting some parts of the secondary market.”
Meanwhile, in terms of residential rents, asking rates were 10.5 per cent lower year-on-year – down 11 per cent for apartments and 9.2 per cent for villas.
However, on a quarterly basis, asking rents remained flat for both villas and apartments, the report said.
“Landlords have become more accommodating in reducing rents for existing tenants approaching lease renewal,” it stated.
“Previously high yielding areas such as International City, Dubai Production City and Motor City saw declining rents contribute towards quarterly capital declines of up to 2.8 per cent,” it added.
Also, some families living in high-rise buildings in Dubai Marina and neighbouring areas have opted to shift to townhouses located further east, due to “insignificant difference” in market rents.
For instance, 90 per cent of all three-bed apartment rentals listed in Dubai Marina are more or less equivalent in rent to a three-bed townhouse in Arabian Ranches, The Springs, Jumeirah Village Circle, Al Furjan and Mira, ValuStrat said.
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