Q3 2017 Dubai Residential Report: Downward Trend Continuation

• Marginal price declines continue, averaging 1.2% year on year for apartments and 1.4% for villas/townhouses in Dubai during Q3 2017
• Average rents in Q3 2017 have declined at a faster pace than prices over the last twelve months
• Property Monitor Residential Survey reveals that for Q4 2017 the majority of agents are predicting apartment and villa/townhouse prices as well as rents will decline further.

Cavendish Maxwell released its Q3 2017 Dubai residential report providing analysis and summary of apartment and villa/townhouse properties. The report highlights price movements, rents and yield scenarios, residential supply as well as the demand factors impacting this segment.

Price performance

Prices for apartment and villa/townhouses in Dubai have continued to decline during the first nine months of the year. This downward trend has created a wider gap in the price performance of quality stock in established areas with limited upcoming supply against that of newer developments in emerging locations. “Factors such as proximity to central business district, social infrastructure like schools, supermarkets as well as build quality and developer track record will continue to play a larger role in maintaining price levels in the Dubai residential market,” said Manika Dhama, Senior Consultant, Strategic Consulting and Research at Cavendish Maxwell.

Rent performance

Rents in Dubai have declined by 2.8% for apartments and 3.5% for villas/townhouses on average during the last twelve months, according to the Property Monitor Index. “This has resulted from a combination of factors including new project handovers, especially of lower priced inventory, as well as the readjustment of salaries and job losses in some key sectors. In response, to limit void periods on their properties, landlords have begun offering incentives such as the first month rent free as well as the option to pay through multiple cheques,” said Dhama. According to Property Monitor, four cheques annually are now the average compared with the earlier practice of single cheque payments being prevalent in the Dubai residential market.

Transaction overview

More than 8,900 residential property transactions were recorded in Q3, with July accounting for nearly 40% of the total. Off-plan sales continued to drive residential market activity in the third quarter, accounting for 77% of the total. Top locations for Q3 off-plan transactions were Dubai South, Mohammed Bin Rashid City, Business Bay and Town Square. “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,” said Sathya Srinivasan, Head of Strategic Consulting and Research.

“The introduction of new innovative mortgage products by some local banks has also contributed towards this increased activity.”

Residential supply

Approximately 11,800 residential units have been handed over across Dubai during the first nine months of this year. According to the Property Monitor Supply Tracker, the upcoming supply for the remainder of 2017 is largely concentrated in Dubai Marina, Jumeirah Village Circle, Sports City, Al Quoz and Business Bay. All these locations have more than 2,000 units projected to be handed over in the last quarter of the year. “New supply continues to exert pressure on rents, which have been declining at a faster pace than prices over the last 12 months. Some developers have begun responding to this market reality by phasing the delivery of projects,” said Srinivasan.

Property Monitor Residential Survey

The Dubai report also draws on the Property Monitor Residential Survey conducted among agents in the emirate. For Q4 2017 the majority of agents surveyed are predicting apartment and villa/townhouse prices as well as rents will decrease further. In terms of transactions, 63% of agents expect new buyer enquiries to increase, while 56% expect an increase in the number of agreed sales. The majority of those surveyed (52%) believe new seller instructions will also increase during the Q4 of 2017.