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• Market to remain soft throughout the remainder of 2018 as new supply continues to outstrip demand coupled with negative impact of macro and microeconomic issues

• Apartment and villa rentals down 4% and 2% respectively Q-o-Q; sales prices for apartments down 1% while villas remained flat compared with Q1

Dubai’s residential market is continuing to feel the pressure of property oversupply according to analysis from leading international property company Chestertons latest Observer: Dubai Q2 2018 report.

Overall rental rates for apartments and villas softened by 4% and 2% respectively quarter-on-quarter, while sales prices for apartments fell by 1% compared to the last quarter and average villa sales prices remained flat during the same period. As affordability continues to dominate the residential sector, it was the mid-market segment which witnessed the largest uptake as it appears one-time tenants took advantage of a range of flexible and affordable payment plans and opted to buy.

“Affordability has undoubtedly been one of the top trends so far this year. What we’re witnessing, especially with the large amount of supply entering the market, is that developers are focusing on the investment-active, mid-market segment through a range of flexible payment options and smaller units to keep prices attractive; piquing the interest of would-be investors,” said Ivana Gazivoda Vucinic, Head of Consulting and Valuations and Advisory Operations, Chestertons MENA.

From an apartment sales perspective, Business Bay rebounded well after recording a 9% decline last quarter, the steepest in Dubai during that period, notching a 4% increase to AED1,226 per sqft. This figure, however, was still below the Q2 2017 price of AED1,268 per sqft. Jumeriah Village Circle was another standout performer this quarter increasing 6% to AED871 per sqft having bared the brunt of an 8% decrease in Q1. Dubai Motor City was the only other area which saw growth, increasing by 2% to AED822 per sqft.

International City saw the steepest decline at 7%, with prices dropping to AED589 per sqft, while The Greens fell for the fourth quarter in a row by 2% to 1,077 per sqft.

In the villa sales market, quarter-on-quarter Palm Jumeriah was the only area which saw an increase, with prices up 4% to AED2,298 per sqft. Arabian Ranches, Jumeriah Park and The Lakes all witnessed softening of 2%, 3% and 1% respectively, while The Meadows and The Springs remained flat.

Once again in the rental market, Q2 declines were spread across different unit types. Previously the declines were most prominently felt in larger units however this quarter, it appears all unit types are susceptible to falling prices. In The Greens, one bedroom apartments fell by 9% to AED72,000 per year, whereas a three-bedroom apartment in the same area increased by 3% to AED144,000 per year.

The greatest decline in apartment rental rates was Dubai Sports City, dropping 7% with a one-bedroom unit available for AED57,000 per annum. This was closely followed by Motor City and Jumeriah Lake Towers where declines of 6% were witnessed, with the cost of renting a one-bedroom apartment now priced at AED71,000 and AED77,000 respectively.

Villa rents saw the highest decline in The Springs and Victory Heights at 4%, followed by Al Furjan and Jumeriah Village Triangle at 2%. The Meadows, Jumeriah Islands and Jumeriah Golf Estate all decreased by 1%, while Arabian Ranches was the only community to increase in price, by 1%.

A two-bedroom villa in Arabian Ranches is priced at AED133,000; in The Springs the price is AED115,000; in The Lakes the cost is AED163,000; and in Jumeriah Village Triangle the cost per annum is AED140,000.

For larger units, five-bedroom properties in Jumeirah Golf Estates, Jumeriah Islands and The Lakes were the most expensive at AED390,000, AED350,000 and AED315,000 respectively.

“The average decline in rental rates can be attributed to several factors, including greater choices at reduced prices. The focus for developers and landlords going forward should be on quality, as tenants proactively seek out cheaper options or move to better quality units for the same price as their existing units,” said Vucinic.

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