Dubai’s second quarter property sales dim broker expectations

After an extremely upbeat first quarter, real estate brokers’ expectations fell short between April to end June. This had to do with volumes taking a decline last month, which also coincided with Ramadan.

“According to the data from real estate agencies, transaction levels for second quarter of 2017 are lower than first quarter,” states a new market update from Cavendish Maxwell, the consultancy. “The majority of agents (surveyed) had predicted new buyer enquiries, seller instructions and agreed sales would increase in Q2-17.”

But brokers, or a good majority of them, are hopeful that the third quarter will see a return in across-the-board gains, with 54 per cent saying “agreed sales” would increase, while 56 per cent predict an uptick for buyer enquiries.

New launches during the second quarter included 634 residential units in Dubai Healthcare City from Azizi Developments, 200 apartments by Vincitore Real Estate Development in Arjan, Dubai Properties’ phase three launch of townhouses in Serena community at Dubailand, among others. As against that, around 3,100 homes were handed over in the three months from April.

Transactions during the first-half did surpass the volumes over the same period in 2016. February was “particularly active for off-plan villa/townhouse transactions with new launches in Dubailand and soon to be handed over communities in Arabian Ranches 2, accounting for the majority”.

On average, transaction values for apartments have been trading within a close range of Dh1.2 million to Dh1.4 million over the last 12 months, while the average for villas/townhouses softened from Dh3.7 million in the third quarter of 2016 to Dh2.2 million in the last quarter.

“Lower priced villa/townhouse inventory continues to enter the market in locations such as Dubailand, impacting price dynamics for existing communities,” the report states. “For apartments, starting prices of Dh700,000 in emerging locations such as Dubai South and Sports City is driving demand from first-time buyers. Communities with existing infrastructure and amenities continue to fare better than outlying areas which have limited facilities.”

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Keeping an eye out for VAT

While it is expected that residential property sales and rents are exempt from VAT (value-added tax), “there may be an indirect impact on housing budgets and hence affordability,” states the new Cavendish Maxwell report. “Building materials are likely to attract tax from 2018 onwards and the additional costs must be factored into the development costs.”

Commercial leases could also come under the VAT regime, and “given the rent performance in the majority of the micro-markets, it is likely that the charge will be borne by the landlord rather than being passed on to the tenants,” the report adds.