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Has Dubai’s property market finally stabilised?

by Jumana Abdel-Razzaq on Apr 24, 2018

Cluttons also expects values to slip by up to 5% or 7% this year.
Cluttons also expects values to slip by up to 5% or 7% this year.

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There has been much talk about Dubai property and the presumed slowing down of the market over the past few years.

Reports have continuously shown declines in rents and sales, with prices dropping by 5%-10% in 2017 alone, according to an S&P Global report earlier this year.

But some experts have recently noticed a change in these trends for the first quarter of 2018 as prices have stagnated, marking the first stable quarter for rents in the emirate in over two years.

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Joanne Phillips, general manager of the mortgage division at Holborn Assets, a global financial services group, believes an oversupply of units, lower rents, and a dip in values have contributed to a major reshaping of the property landscape.

“Old predictions of ‘continuous growth’ have been replaced with more grounded ideas of what is achievable as the sector continues to mature beyond the ‘bubble’ that enveloped it prior to the 2008 financial crisis,” she said.

Phillips notes that in 2017, the market witnessed a number of significant trends, including a 12% drop in rental prices, a decrease in 4% across all quality brands, and a 20% decline in ‘luxury’ areas such as Dubai Marina and Downtown Dubai.

But she explains that last year was widely recognised as a ‘testing’ time for the market. One reason for that could be attributed to the dip in prices over the last 18 months, which has made the market more accessible.

More importantly, she said, the continuing lack of taxes, specifically related to capital gains, property appreciation, salaries and rental yields, means there is potential for strong returns on investment.

“While this could be interpreted as a warning, property in Dubai still presents investors with many exciting opportunities,” Phillips added.

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But some experts still expect continuing declines in the next couple of months despite the more positive outlook of the first quarter, which helped improve the annual rate of change to -3.1%, from -7.7% in 2017.

Cluttons’ Dubai Spring 2018 Property Market Outlook reports that while the rental market has shown signs of stabilising, the growing volume of off-plan investment stock, destined to be made available for rent after handover, is likely to pose challenges in the future.

The ability of the rental market to absorb a high volume of new stock will likely be tested over the next three years, it adds.

Murray Strang, head of Cluttons Dubai, said: “We expect newly completed rental properties to command the attention of tenants, while older and more secondary property will register rent falls.

“This flight to quality phenomenon will likely result in the creation of a very distinctive two-tiered market. In the short-term, we expect rents to slip by up to 5-7% over the remainder of 2018.”

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