Latest price and rental movements suggest the market could be heading up
Dubai: Potential property buyers in Dubai shouldn’t wait around to take a decision — chances are that some sort of firming up in values will happen in the next 12 months.
At some of Dubai’s older and popular freehold communities, there have been marginal gains, of under 3-4 per cent, in value from a year ago. And where prices are still dropping, the rate of decline has dipped by less than 1-2 per cent.
But in the second quarter, there was “little change in prices or rentals, although there were signs of increased activity in the residential sector”.
All of which is far removed from the 5-10 per cent drop Dubai’s freehold areas saw in price declines in the 12 months to mid-2016.
The recent value gains are being led by improving demand for existing properties in the secondary market during the first six months of the year.
Now, if this demand is maintained and there are delays in new homes hitting the market, it could put pressure on prices.
Much will then depend “on how many of the potential supply of 78,000 units actually complete over the next three years”, a JLL report says.
In Dubai, the “materialisation rate” — deliveries actually meeting promised deadlines — has been running at a low 40 per cent.
In the three months from April, 3,600 homes were delivered in Dubai, including 584 town houses at the Al Warsan Village in International City and 250 villas in Al Furjan. “A further 25,000 units are under construction and scheduled for delivery by the end of 2017, but only half of these are considered likely to be handed over by year-end.”
And for those looking at the city’s rental market for bargains, there is even less of an opportunity to find a home at lower rates. “Few landlords [are] willing to reduce rentals for existing tenants,” notes the new Dubai realty update from JLL.
But at newly-let properties, prospective tenants might still see slightly more favourable terms from landlords. “Rents continue to see single-digit year-on-year declines of 6.5 per cent and 4.2 per cent for apartments and villas,” the JLL report states.
“These relate to new lettings.”
On the office side of things, there is demand from tenants … but on extremely selective terms.
There is “healthy demand for single-owned buildings in the free zones and those offering joint licenses,” the report states.
“This has resulted in vacancies remaining stable in the central business district at 14 per cent in the second quarter of Q217.”
Average rents in the CBD have in fact risen, albeit marginally, by 1.3 per cent from a year ago to Dh1,947 a square metre, around Dh180 a square foot, during the second quarter.
But secondary locations have gone through a steep 37 per cent drop in rents over the last 12 months, “due to sustained oversupply of strata office and a general softening of demand.”
Around 33,000 square metres of new office stock was delivered in the second quarter of 2017.
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