They have declined 6.9% in Q1, 2017

If you are looking to buy a home in Dubai or move homes to capitalise on cheaper rents, wait no more. The rate of decline of both Dubai sales prices and rents is slowing and the market is expected to hit bottom before the end of this year.

According to real estate consultancy Cluttons, average residential prices moderated by 0.9 per cent in Q1 2017.

But, luxury property has been seeing substantial price declines, with prices of Burj Khalifa apartments leading the way. They witnessed a correction of 25 per cent in value over the past 12 months and -6.9 per cent in Q1, 2017.

Hattan Villas at The Lakes (-13.5 per cent), Hattan Villas at Arabian Ranches (-12.6 per cent), villas on the Palm Jumeirah (-12.3 per cent) and apartments on the Palm Jumeirah (-11 per cent) make up the list of the five weakest-performing markets over the last 12 months, Cluttons added.

The annual rate of decline of Dubai home prices slowed from -8.8 per cent at the close of 2016 to -7.8 per cent at the end of March. Dubai residential prices are now 28.7 per cent cheaper than their Q3 2008 market peak.

Meanwhile, Dubai’s residential rents dipped one per cent quarter on quarter during Q1 2017, driven by an increase in the number of available homes and more constrained demand, according to CBRE. Larger apartment units felt the price pressure more. Landlords are also becoming flexible with rents and tenants are able to negotiate, CBRE added.

Faisal Durrani, head of research at Cluttons, said: “While local economic drivers may appear robust, regional and global economic uncertainty has curtailed domestic growth. Despite this, the off-plan residential sales market has remained resilient and in fact accounted for 53 per cent of all deals in 2016. This has been aided by some favourable payment plans that stretch beyond handover.”

Future supply levels in Dubai continue to rise as developers make a concerted push in the build-up to Expo 2020.

“This is driving annual deliveries well above the five-year average, with expectations that these numbers will continue to rise in the short to medium term as new master plans come on stream,” said Mat Green, head of research and consultancy UAE, CBRE Middle East.

Cluttons estimates that Dubai average rents dropped 9.9 per cent last year.

“The rate of creation of senior level executive positions has fallen and this is reflected in the lower level of enquiries and budgets,” said Durrani.
In the Dubai office market, the planned introduction of VAT on January 1, 2018 is causing nervousness among existing tenants.

Murray Strang, head of Cluttons Dubai, said: “For many international occupiers, they will be able to take this in their stride, given that they are used to taxation regimes in their own home markets. However, for international occupiers from the UK, or Europe, the prospect of a five per cent tax on rental payments, combined with a rise in operational costs fuelled by the strength of the US dollar, may dampen take-up activity in the short to medium term.”

Deepthi Nair /Dubai
Filed on April 3, 2017 | Last updated on April 3, 2017 at 08.07 am
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