Dubai property prices fall by 11% in 2015

Business Sunday 07/February/2016 19:12 PM
By: Times News Service
Dubai property prices fall by 11% in 2015

Muscat: Dubai’s residential sales across-the-board declined in 2015, with villa sales prices down year-on-year by 11 per cent and apartments by 8 per cent, according to a report by Asteco, a leading real estate consultancy.
Villas on Palm Jumeirah recorded price declines of 13 per cent over the year, dropping to Dh2,475 per square feet on average and The Meadows was also down 15 per cent to Dh1,150, says the study, which provides a review of last year and 2016 outlook.
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.
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.
“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 of Asteco.
End-users, rather than investors, were the predominant buyers of villas and townhouses, with a clear preference for smaller 2-, 3-, and 4-bedroom units, rather than large villas. New communities such as Mudon and Arabian Ranches Phase 2 saw improved levels of activity, offering better-priced yet good quality alternatives to some of the more established areas.
At the high end of the apartment market, Jumeirah Beach Residence was down 16 per cent to Dh1,370 per square feett and apartments on the Palm Jumeirah dropped 14 per cent to Dh1,720 per square feet on average.
Villa rentals were down 9 per cent on average year-on-year, but Al Barsha recorded an increase for three-bedroom villas, up 9.2 per cent to Dh213,000 per annum while in Mirdiff similar properties rose 4.2 per cent to Dh138,000.
The biggest falls came in Jumeirah and Umm Suqeim where three-bed villas dropped more than Dh50,000 or 20 per cent on average to hit Dh195,000, while larger four-bedroom homes in Arabian Ranches and Jumeirah Park were also down 19 per cent to Dh243,000 and 15.5 per cent to Dh145,000 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 per cent on average, although Asteco recorded disparities between different areas.
Apartment rental rates were down by 4 per cent on average, with Sheikh Zayed Road recording the highest drop of over 12 per cent. Dubai Marina and Palm Jumeirah both saw a year-on-year dip, with a one-bedroom apartment dropping 13.3 per cent to Dh98,000 and 10 per cent to Dh135,000, respectively.
The DIFC area was not immune either in 2015, two-bedroom units have dropped 8.7 per cent to Dh158,000 per annum, as did JBR with the highest average decline for a two-bedroom apartment, dropping 9.2 per cent to Dh148,000.
“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.
The commercial office sector fared slightly better despite significant new space of 500,000 square metres coming online in 2015 and 1.1 million square metres set to be delivered in 2016. The first half of 2015 saw improved levels of demand leading to moderate increases in rental rates in certain areas.
“The majority of new office supply entering the market this year will be strata-owned buildings in popular office areas like Business Bay and Jumeirah Lake Towers. Sales demand is expected to come primarily from SME level end-users,” added Stevens.