Property investors and tenants are set to reap benefits with competitive pricing and rental rates
Developers in Dubai’s residential property market are targeting a new buyer and tenant segment by offering innovative co-living and licensed co-working concepts, according to leading international real estate services firm, Chestertons.
As several off-plan projects launched between 2014 and 2016 are delivered, potential investors and tenants are set to reap the benefits, with competitive pricing and rental rates becoming available throughout Dubai, stated the company in its new research 'Observer: Dubai Market Report Q1 2019.'
"Last year we saw over 20,000 units enter the market, resulting in softening across the sales and rental sectors for both apartments and villas. This is a trend we expect to continue throughout 2019 as the number of units estimated to be delivered is set to be even higher," remarked Ivana Vucinic, the head of consulting at Chestertons Mena.
"As a result, we expect to see developers and landlords continue to offer a range of financial incentives and become increasingly innovative in their approach," he stated.
As several off-plan projects launched between 2014 and 2016 are delivered, potential investors and tenants are set to reap the benefits, with competitive pricing and rental rates, become available throughout Dubai.
In the sales market, the downward pressure on prices witnessed throughout 2018 has continued into Q1 2019 with villa and apartment prices down 1% and 3% respectively.
The most resilient communities, from an apartment perspective, were Downtown, Dubailand, Dubai Motor City and Dubai Silicon Oasis, all retaining the same price levels as the previous quarter, at Dh1,511 per sqft, Dh722 per sqft, Dh713 per sqft and Dh703 per sqft respectively.
International City, Dubai Sports City and Business Bay experienced the greatest correction with a quarter-on-quarter decrease of 7% with prices dropping to Dh481 per sqft, Dh737 per sqft and Dh1,038 per sqft respectively.
The Views and Discovery Gardens remained comparatively competitive with only a 1% decrease compared to Q4 2018 with prices at Dh1,197 per sqft and Dh627 per sqft respectively.
With regards to villas, the most resilient community was The Lakes with prices unchanged from Q4 holding firm at Dh1,107 per sqft. In contrast to the previous quarter, The Meadows and Springs witnessed the highest declines, revealing a 4% decrease with prices dropping to Dh897 per sqft, said the report.
Jumeirah Park had a slight decline of 1% in Q1 2019 whilst Palm Jumeirah and Arabian Ranches both saw declines of 2% during the same period, it added.
Transactional activity, for the most part, was on the rise in Q1 2019, when compared to Q4 2018. The completed unit market witnessed a small decline in transactional volumes in Q1 2019 with a 1% decrease when compared with Q4 2018, from 3,278 to 3,230 units.
In contrast, the volume of off-plan transactions was up 10% on Q4 2018. Perhaps this figure is even more significant given the 33% increase in volumes in Q4 2018 when compared with Q3 2018, stated Chestertons in the report.
Off-plan transaction values increased by 35% from AED5.82 billion in Q4 2018 to AED 7.85 billion in Q1 2019, it added.
"Off-plan sales dominated the market in Q1, indicating the raft of incentives offered by developers, including five-year post-handover payment plans, registration fee rebates, guaranteed rental returns and the freezing of property service charges, are having the desired effect," remarked Vucinic.
In a bid to remain competitive and open up the market to a new segment of buyers, several developers are also currently offering a range of innovative living solutions, allowing residents to live and work in the same space, she stated.
"These solutions are specifically aimed at a younger tenant and buyer profile, who don’t necessarily need large living spaces but place importance on having their business and lifestyle requirements catered to in one development. Such solutions are being offered in Emaar’s Collective Tower and Socio as well as Nshama’s UNA in the Town Square community," she explained.
Another key strategy being employed by developers to boost investor interest and absorption rates is the introduction of rent-to-own (RTO) schemes.
These schemes offset the need for a large cash deposit and would appeal to buyers who don’t have the 25% down payment or are unsure of future market trends. RTO deals can currently be found in areas such as Jumeirah Village Circle, Palm Jumeirah and Dubai Sports City.
According to Vucinic, in the rental market, the additional supply and subsequent greater choice was creating a favourable scenario for tenants with average leases for both apartments and villas witnessing a 2% decline when compared to Q4 2018.
For apartments, Dubai Motor City, Dubai Silicon Oasis, Dubai Sports City and JLT all experienced a 4% decline from Q4 2018. A three-bedroom apartment in each of these locations rented for Dh122,000, Dh90,000, Dh90,000 and Dh120,000 per annum respectively, she stated.
It was only more established communities displaying resilience, with Dubai Marina and Business Bay showing no change from the previous quarter with a three-bedroom apartment in Dubai Marina renting for Dh157,000 per annum and in Business Bay for Dh143,000 per annum.
In the villa market, JVT bore the brunt of rental declines, with a 5% decrease compared to Q4 2018 while Jumeirah Golf Estates, Jumeirah Islands and The Lakes saw no movement during that period.
“Due to the supply/demand dynamics, we’ve seen several landlords offering lower rental rates and incentives to attract and retain tenants. Multiple rent cheques, rent-free periods, waiver of security deposits and in some instances the landlord covering the cost of agency fees are all becoming increasingly more common,” remarked Vucinic.
"We are also seeing an increase in Airbnb style rentals in the market with increasing occupancy rates year-on-year. This could be a result of ongoing downward corrections in the long term rental market," she stated.
"These types of properties are preferable for individuals working in the emirate on a project basis or who are within their probation period, as they are unable to commit to traditional annual rental contracts as the tenancy cannot be registered if the residency visa is still to be granted," she added.
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