Dubai’s residential market is continuing to feel the pressure of property oversupply, according to Chestertons.
Its latest Observer: Dubai Q2 2018 report said overall rental rates for apartments and villas softened by 4 percent and 2 percent respectively quarter-on-quarter, while sales prices for apartments fell by 1 percent compared to the last quarter and average villa sales prices remained flat during the same period.
Chestertons said as affordability continues to dominate the residential sector, it was the mid-market segment which witnessed the largest uptake as it appears one-time tenants took advantage of a range of flexible and affordable payment plans and opted to buy.
“Affordability has undoubtedly been one of the top trends so far this year. What we’re witnessing, especially with the large amount of supply entering the market, is that developers are focusing on the investment-active, mid-market segment through a range of flexible payment options and smaller units to keep prices attractive; piquing the interest of would-be investors,” said Ivana Gazivoda Vucinic, head of consulting and valuations and advisory operations, Chestertons MENA.
The report showed that from an apartment sales perspective, Business Bay rebounded well after recording a 9 percent decline last quarter, the steepest in Dubai during that period, notching a 4 percent increase to AED1,226 per sq ft.This figure, however, was still below the Q2 2017 price of AED1,268 per sq ft.
Jumeirah Village Circle was another standout performer this quarter increasing 6 percent to AED871 per sq ft having bared the brunt of an 8 percent decrease in Q1. Dubai Motor City was the only other area which saw growth, increasing by 2 percent to AED822 per sq ft.
International City saw the steepest decline at 7 percent, with prices dropping to AED589 per sq ft, while The Greens fell for the fourth quarter in a row by 2 percent to 1,077 per sq ft.
In the villa sales market, quarter-on-quarter Palm Jumeirah was the only area which saw an increase, with prices up 4 percent to AED2,298 per sq ft. Arabian Ranches, JumeriahPark and The Lakes all witnessed softening of 2 percent, 3 percent and 1 percent respectively, while The Meadows and The Springs remained flat.
The greatest decline in apartment rental rates was Dubai Sports City, dropping 7 percent with a one-bedroom unit available for AED57,000 per annum. This was closely followed by Motor City and Jumeriah Lake Towers where declines of 6 percent were witnessed, with the cost of renting a one-bedroom apartment now priced at AED71,000 and AED77,000 respectively.
Villa rents saw the highest decline in The Springs and Victory Heights at 4 percent, followed by Al Furjan and Jumeriah Village Triangle at 2 percent. The Meadows, Jumeriah Islands and Jumeriah Golf Estate all decreased by 1 percent, while Arabian Ranches was the only community to increase in price, by 1 percent.
“The average decline in rental rates can be attributed to several factors, including greater choices at reduced prices. The focus for developers and landlords going forward should be on quality, as tenants proactively seek out cheaper options or move to better quality units for the same price as their existing units,” said Vucinic.
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