'Dubai property prices fell 11% in 2015'
22,000 apartments and 7,700 villas are scheduled for delivery this year, keeping downward pressure on sales and rental rates through 2017
Residential sales recorded in Dubai have declined, with villa sales prices down year-on-year by 11% and apartments by 8%, according to real estate consultancy, Asteco.
As per its latest Dubai report, affordable communities are leading the way in terms of rental demand and investor opportunity against a scenario of significant oversupply looming in the high-end and luxury segments.
The report flags the impact of delayed project delivery in 2015 and a large pipeline for 2016, coupled with the demand slowdown and continued low oil prices, as an indicator of market prospects this year, with both rental rates and sales prices coming under further pressure.
A total of 13,500 apartments and 800 villas were added to Dubai’s residential real estate supply in 2015, and a further 22,000 apartments and 7,700 villas are scheduled to be delivered in 2016, with downward rental rate pressure likely to continue through to 2017, says the report.
“However, if we look to the medium and long-term, the outlook is more positive with demand more than likely to grow in line with the progress of key infrastructure projects currently underway, such as Dubai World Central Airport and Expo 2020,” said John Stevens, managing director, Asteco.
Villas on Palm Jumeirah recorded price declines of 13% over the year, dropping to $674 (AED2,475) per square foot on average and The Meadows was also down 15% to $313 (AED1,150).
At the high end of the apartment market, Jumeirah Beach Residence was down 16% to $373 (AED1,370) per square foot and apartments on the Palm Jumeirah dropped 14% to $468 (AED1,720) per square foot on average.
The biggest falls came in Jumeirah and Umm Suqeim where three-bed villas dropped more than $13,613 (AED50,000) or 20% on average to hit $53,090 (AED195,000), while larger four-bedroom homes in Arabian Ranches and Jumeirah Park were also down 19% to $66,149 (AED243,000) and 15.5% to $39,478 (AED145,000) respectively.
“With fresh new supply entering the market, this is forcing property owners, especially of older independent villas, to become increasingly competitive on pricing,” remarked Stevens.
With supply handover slower than anticipated in 2015, apartment rental rates remained broadly stable over the year, dipping just 1% on average, although Asteco recorded disparities between different areas.
Apartment rental rates were down by 4% on average, with Sheikh Zayed Road recording the highest drop of over 12%. Dubai Marina and Palm Jumeirah both saw a year-on-year dip, with a one-bedroom apartment dropping 13.3% to $26,681 (AED98,000) and 10% to $36,755 (AED135,000) respectively.
“For property owners, adjustments in terms of rental expectations and payment flexibility will have to be made. And, as usual in cases of increased supply, better quality, well managed or value-for- money properties will be able to achieve higher occupancy levels than others,” noted Stevens.