The residential prices and rents in the UAE property sector are likely to soften in 2019, however there could be additional demand in the coming months which will help underpin the market as a result of the recent approval of a range of legislations to ease visa regulations, given that many of the changes are linked to property ownership, according to global property consultancy Knight Frank.
Mainstream residential prices in Dubai fell by 4.1 per cent over the year to November 2018, stated the expert citing data from its Property Monitor Index.
Prices for villas continue to fall at a faster pace at 6.1 per cent, compared to prices for apartments which fell by 4.8 per cent over the same time period, it stated.
On a community-wide basis, data as of November 2018 shows that of the 61 communities and property types tracked in Dubai by Property Monitor, only one area has registered an annual increase in prices, this is down from Q1 2018, where five areas had registered increasing prices in Dubai.
The current gap between the top and bottom ranking communities, in terms of annual price performance, currently stands at 9.1 per cent, up from the 7.6 per cent registered in March 2018, it stated.
These price movements show that the property sector continues to see a fragmented market operate in Dubai, it added.
Knight Frank said that compared to the mainstream market, the prime market had performed better in relative terms, however there still has been pressure on prices, with prime residential prices in the year to November 2018 falling on average by 3.3 per cent.
Rental rates across Dubai fell on average by 7.7 per cent in the year to November 2018 with apartment rents falling by 8.4 per cent and villa/townhouse rents by 8.3 per cent over the same time period.
Gross yields in Dubai currently stand at 6.27 per cent as at November 2018, down from 6.45 per cent a year earlier, this is as a result of rents declining at a faster pace than sales prices over this time period.
Total mainstream transaction volumes during the period from January to November last year fell by 14.9 per cent when compared to the year before. The main contributor to this decline has been due to the slowdown in transactions in the off-plan market, where over the same time period, transactions fell by 35 per cent, said the expert.
Whereas, the secondary market has recorded a growth in transaction volumes of 2.2 per cent, it added.
According to Knight Frank, the decline in overall transactions had been particularly severe in the first three months of the year and then again in the summer months from June to September.
However since then there has been a decline in transactions moderate with transactions falling 3 per cent year-on-year to November 2018.
On the Abu Dhabi market, Knight Frank said in the year to November, the average sales prices in the UAE capital fell by 4.7 per cent.
Annual price declines on average for apartments and villas/townhouses were recorded at 4.4 per cent and 4.9 per cent respectively, stated , according to the Property Monitor Index
Key-sub submarkets and property types in Abu Dhabi have continued to see prices fall in the year-to November 2018, however the rate at which prices are falling is slowing, it stated.
Over this time period, the largest declines were witnessed in Al Reem Island’s apartment market which fell 5.7 per cent and in Saadiyat Island’s and Al Reef’s villa/ townhouse markets, which fell by 5.6 per cent each. Whilst, seven of the 10 sales markets tracked by Knight Frank have shown annual price declines of 5 per cent or more in the year to November 2018, there have been some areas which have outperformed the market in relative terms, albeit with prices still declining.
The property expert pointed out that apartments on Yas Island recorded the lowest level of annual price falls at 1.4 per cent.
Rental rates across Abu Dhabi fell on average by 8.7 per cent in the year to November, according to the Property Monitor Index.
On average, apartment rents fell by 7.7 per cent and Villa rents by 8.4 per cent over the same time period, it stated.
Gross yields in Abu Dhabi currently stand at 6.5 per cent as at November 2018, down from 6.71 per cent a year earlier, once again this is as a result of rents declining at a faster pace than sales prices over this time period.
On the UAE office sector, Knight Frank said in the short to medium-term, the market conditions would remain challenging with rental rates continuing to fall.
Similarly on the retail sector too, the market conditions are challenging, the property expert stated. As a result of the level of incoming retail supply in Abu Dhabi and more so in Dubai, it is likely to mean that operators and retailers are likely to face extreme pressure over the coming five years, said a senior official.
"Whilst there are clear challenges facing the market, a trend we expect to continue in 2019, the recent approval of a range of legislations to ease visa and foreign business ownership by the UAE Cabinet are likely to drive addition demand in the UAE’s property market," remarked Taimur Khan, the research manager.
"Looking ahead we expect that the prime segments of the market are likely to continue to outperform the mainstream market overall," he added.
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