• Completed unit market continued to exhibit increasing resilience to the decline in transactional volumes in Q4 with a 22% increase over Q3
• Apartment and villa rentals down 4% and 3% respectively Q-o-Q; Y-o-Y performance for apartments saw rents down 12% and villas 8% from 2017
• Sales prices for apartments declined 5% and villas notched a 3% decrease when compared with the previous quarter. Y-o-Y performance for apartments saw sales prices down 16% and for villas 13% from last year
Dubai’s residential sector in the final quarter of 2018 witnessed a continuation of the tough trading conditions experienced in Q3 however, due to increased affordability, completed unit transactions saw a 22% increase in transaction volumes over Q3 and an overall 7% uplift across 2018, according to research from leading international real estate services firm, Chestertons, latest Observer: Dubai Market Report Q4 2018.
Average apartment sales prices fell by 5% from the previous quarter whilst average villa prices softened by 3%. Furthermore, year-on-year performance showed that apartment prices declined, overall, by 16% and villas by 13%. In the rental market, rates are still favouring tenants as apartments saw a further 4% decrease with a 3% drop for villas from the previous quarter. This was a continuation of a trend which saw an overall 12% annual decline in apartment rental rates and 8% for villas.
“The real estate market recovery in Dubai continues to be hampered by the increasing excess supply being released to the market. However, our research has highlighted 41% of all residential transactions now relate to completed units, up 6% from 2017, indicating a shift in buyers’ interests, with the trend set to gain further momentum in 2019 as developers offer attractive incentives and long-term payment plans,” said Ivana Gazivoda Vucinic, Head of Consulting, Chestertons MENA.
In the sales market, Q4 continued the trend seen throughout 2018 as prices witnessed further declines in both the apartment and villa markets. In the apartment segment, prices in Dubai Sports City, International City and Jumeirah Village Circle (JVC) all fell by 9% compared to the previous quarter, to AED793 per sqft, AED516 per sqft and AED759 per sqft respectively.
Downtown Dubai and The Greens fell by 8% and 7% respectively with prices now at AED1,515 per sqft in Downtown and AED965 per sqft in The Greens. In contrast, Dubai Marina remained one of the most resilient locations for investors and end users witnessing a decline of just 1%, with prices now at AED1,185 per sft. Annually, it was Discovery Gardens which saw the steepest decline, with prices dropping by 25% year-on-year to AED636 per sqft. The most resilient apartment location was Dubailand with just a 5% adjustment from the previous year.
In the villa sales market, Palm Jumeirah, once again, observed a further decline in Q4 with a 7% decrease to AED2,035 per sqft. The Meadows and Springs remained unchanged from the previous quarter at AED936 per sqft while Arabian Ranches fell by just 1% to AED840 per sqft indicating the prices in these particular communities may have bottomed out.
In the rental market, apartments in Dubai Marina, Dubai Silicon Oasis, Dubai Sports City, Dubailand and International City, witnessed a 5% decline in Q4, with a one-bedroom in Dubai Marina now available for AED82,500. Downtown Dubai, JLT, JVC and Dubai Motor City all declined by 4% from the previous quarter with a one-bedroom in the former now available for AED95,000. Due to the increasing stock of smaller format and studio apartments, these units appear to be most affected by market adjustments with a year-on-year recorded drop of 16% for studios and 12% for one-bedroom units.
In the villa rental market, the highest Q-on-Q declines were witnessed in three-bedroom units with average rental declines of 4%. In Al Furjan, which fell by 7%, on average, a three-bedroom unit is now available for AED138,000. In Arabian Ranches and JVT, average rental rates fell by 4%and 3-bedroom units are now available for AED160,000 and AED150,000 respectively. On Palm Jumeirah, rental rates fell by just 1% with a three-bedroom villa renting for AED300,000.
“From a rental perspective, Dubai continues to be a tenant-friendly market, with many making significant savings by renegotiating terms and price with current landlords or moving to a cheaper location within their current district or relocating to a new community,” added Vucinic
The addition of new stock and limited new demand continues to place pressure on landlords with many of them competing on several fronts to retain or attract new tenants with multiple cheques, rent-free periods and in some cases agency fees being covered.
According to Vucinic, this could result in landlords taking advantage of the holiday let market, which has been legal in Dubai since 2016. “With demand for annual contracts weakening and rents continuing to fall, short-term holiday rental could prove very lucrative, especially in popular locations, particularly as we edge ever closer to Expo 2020,” she said.