Dubai's residential rents have witnessed a steep drop - 2.8 per cent for apartments and 3.5 per cent for villas/townhouses - in the third quarter mainly due to key factors such as new project handovers of lower priced inventory, as well as readjustment of salaries and job losses in some key sectors, said a report.
Prices for apartment and villa/townhouses in Dubai have continued to decline during the first nine months of the year. This downward trend has created a wider gap in the price performance of quality stock in established areas with limited upcoming supply against that of newer developments in emerging locations, stated Cavendish Maxwell, a leading expert in real estate sector.
Average rents in the third quarter have declined at a faster pace than prices over the last twelve months, said the expert in its 'Q3 2017 Dubai Residential' report which provides analysis and summary of apartment and villa/townhouse properties.
The report highlights price movements, rents and yield scenarios, residential supply as well as the demand factors impacting this segment, stated Cavendish Maxwell in its report.
“Factors such as proximity to central business district, social infrastructure like schools, supermarkets as well as build quality and developer track record will continue to play a larger role in maintaining price levels in the Dubai residential market,” remarked Manika Dhama, the senior consultant, strategic consulting and research at Cavendish Maxwell.
"In response, to limit void periods on their properties, landlords have begun offering incentives such as the first month rent free as well as the option to pay through multiple cheques," explained Dhama.
According to Property Monitor, four cheques annually are now the average compared with the earlier practice of single cheque payments being prevalent in the Dubai residential market.
More than 8,900 residential property transactions were recorded in the third quarter, with July accounting for nearly 40 per cent of the total.
Off-plan sales continued to drive residential market activity in the third quarter, accounting for 77 per cent of the total. Top locations for Q3 off-plan transactions were Dubai South, Mohammed Bin Rashid City, Business Bay and Town Square.
“The current momentum in sales activity is driven by a larger proportion of end users than before, particularly first-time buyers, who are entering the market enthused by lower prices and encouraged by attractive payment plans offered by some developers,” remarked Sathya Srinivasan, the head of strategic consulting and research.
“The introduction of new innovative mortgage products by some local banks has also contributed towards this increased activity,” remarked Srinivasan.
Approximately 11,800 residential units have been handed over across Dubai during the first nine months of this year.
According to the Property Monitor Supply Tracker, the upcoming supply for the remainder of 2017 is largely concentrated in Dubai Marina, Jumeirah Village Circle, Sports City, Al Quoz and Business Bay. All these locations have more than 2,000 units projected to be handed over in the last quarter of the year.
“New supply continues to exert pressure on rents, which have been declining at a faster pace than prices over the last 12 months. Some developers have begun responding to this market reality by phasing the delivery of projects,” said Srinivasan.
The Dubai report also draws on the Property Monitor Residential Survey conducted among agents in the emirate.
For the fourth quarter, the majority of agents surveyed are predicting apartment and villa/townhouse prices as well as rents will decrease further, said the report by Cavendish Maxwell.
In terms of transactions, 63 per cent of agents expect new buyer enquiries to increase, while 56 per cent expect an increase in the number of agreed sales.
The majority of those surveyed (52 per cent) believe new seller instructions will also increase during the fourth quarter of 2017.
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