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Dubai rents drop by 2.6% in Q3 2016

values are expected to stabilise towards the end of 2017, though key triggers to slow the decline are likely to continue emerging, report says

This photo is for representational purposes only.
This photo is for representational purposes only.

Property values in Dubai dropped by a further 2.6% in the third quarter of the year, according to a new report by international real estate consultancy, Cluttons.

According to Cluttons’ Dubai Winter 2016/2017 Property Market Outlook report, values are expected to stabilise towards the end of 2017, though key triggers to slow the decline are likely to continue emerging in the form of infrastructure projects linked to Expo 2020 and other mega projects.

This drop has left rent prices 26.7% below the last market high in Q3 2008, says the report.

Murray Strang, head of Cluttons Dubai said: “Although our view of 2017 indicates positive signs to reverse the market’s fortunes, we are closely monitoring the level of residential supply coming to the market.

“With 34,000 units announced this year, it’s clear that project announcements are continuing at an unrestrained pace, despite what could be perceived to be challenging trading conditions.”

Strange noted that if supply continues to increase in the next 12 to 18 months, as the global economy remains unstable, it may cause the current “stability and projected bottoming out of the real estate market to unravel”, with further price falls expected.

Average prices of transacted villas have also fallen by 28.1% since the start of the year, now standing at $1m (AED3.9m).

Villa prices have been dropping consistently over the past several years, falling close to 10% over the last three years alone, according to Faisal Durrani, head of research at Cluttons.

He said: “The villa market has continued to soften during the third quarter with values receding by 2.6% following a contraction of 2.5% in Q2, and taking the annualised rate of change to -7.8%.

“However, this figure conceals the villa market’s varied performance during the third quarter, as average prices contracted mainly due to the weak performance of the luxury segment of the market.”

Apartment rents were unchanged in the third quarter across all the submarkets Cluttons monitors, indicating a flattening out of the market, Durrani continued.

On an annualised basis, villa rents are down by 9.4%, while apartment rents are 5.8% lower than this time last year,” he said.

“Similar to the sales market, the top end of the villa market in locations such as the Palm Jumeirah, Jumeirah Islands, and The Lakes have experienced the strongest rental drops over the last 12 months.”

The report shows that values over the last year at high-end locations such as Hattan Villas at The Lakes and The Palm Jumeirah dropped by 11.9% and 11.1% respectively, while more affordable communities such as The Green Community and Jumeirah Village registered no change in values in Q3.

 

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