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There’s talk of property prices continuing to fall but is the slowdown as dramatic as is being reported?
With regard to sales in Dubai, villas witnessed a 1 per cent decline in prices whereas apartments recorded a 0.7 per cent weakening in Q1 2016. This is bearing in mind that prices had constantly declined in 2015, so Q1 2016 has been relatively stable in comparison. This is also despite some new supply coming online. Dubai’s residential market delivered 1,100 new units mainly in the apartment segment. Jumeirah Golf Estates and Jumeirah Village delivered 46 and 14 new villas, respectively. Abu Dhabi also had a flat start to the year, although there was a mixed sentiment in terms of sales prices with areas like Al Bandar witnessing a 4 per cent decline, while Al Zeina witnessed a 3 per cent increase. Al Raha Gardens villas witnessed a 6 per cent increase in sales prices. The launch of entertainment destination Al Qana brought a new interest to the landscape.
I want to buy an investment rather than a home for myself. What sorts of properties should I home in on?
Overall, market yields have retained some degree of attraction as residential prices drop in the first three months of the year. Apartments provide higher yields than villas, with International City and Discovery Gardens giving the highest yields. If you prefer to invest in a villa, this segment provided an average yield of 4.7 per cent overall, with The Springs having the highest yield at 6.4 per cent. As Abu Dhabi rental rates witnessed a slight increase last quarter, the capital is attractive to would-be investors not end-users. Al Reef Downtown outperformed by providing the highest yields in the apartment and villa segments at 8.9 and 6.9 per cent, respectively. Al Muneera is also performing well. In terms of average sales prices, both apartment and villa prices in Abu Dhabi fell in Q1 2016 by 1 and 2 per cent, respectively.
I’m thinking of buying a property. Can you give me an estimate of closing costs on the purchase of a particular property?
Prices can vary depending on location and property specifications, whether it is considered to be at the higher end or lower end of the market. Looking at the lower range, one-bedroom apartments in Dubai start from Dh435,000, three-bedroom villas from Dh1.2 million and five-bedroom villas from Dh2.3 million. These figures apply to off-plan units. Areas where you can get the most square footage for your money include Dubai Silicon Oasis, Dubailand, International City and Remraam for apartments, and Mudon, Falcon City of Wonders and The Villa for villas. In Abu Dhabi, studios can be purchased from Dh390,000, two-bedroom units from Dh800,000 and five-bedroom villas from Dh2.6 million. When it comes to value, Al Reef Downtown is popular for apartments at Dh930 per square foot, while Khalifa City villas are at around Dh850 per square foot compared to Saadiyat Island where villas go for Dh1,610 per square foot.
I own a business which is growing. I am thinking of buying an office in Dubai. Where can I get the best deal?
The total value of transactions recorded during Q1 2016 within the Dubai office market was Dh778 million, a decrease of 7 per cent from Q4 2015. Sales transactions hit approximately Dh497 million, with March 2016 recording the highest value of transactions at Dh374 million. Sales prices are falling slightly, with some of the lowest prices being enjoyed in TECOM, now fetching around Dh1,110 per square foot and Dubai Silicon Oasis (DSO) at Dh725 per square foot. If you compare this to rental prices, TECOM office space is now renting at Dh103 per square foot, while DSO units cost from Dh60 per square foot. Whether to buy or not depends on the goals of your business. Buying will protect you from rent escalations although this is arguably less of a concern in the current climate. If you have a long-term view, then it’s worth considering. It would also help you avoid eviction notices and you can benefit from capital appreciation
Question of the Week
I’m happy renting now. Will I be able to negotiate a decrease this year?
In Dubai, rental rates are falling slightly with affordable housing in high demand as tenants look to reduce the cost of living. The apartment rental market experienced a 0.5 per cent decline in rents in Q1 2016 overall; the highest decline was in Downtown Dubai at 5 per cent. In the villa segment, Palm Jumeirah witnessed the highest decline at 2.5 per cent. As a guide, studios are now renting from Dh31,000, two-bedroom units from Dh55,000 and five-bedroom villas from Dh150,000, although this represents the lower end of the market. Rental demand is expected to remain weak at current prices. The high-end apartment/villa segment is expected to see more correction. Check the latest adjustment on the RERA rental index. If the annual rent for your property falls above the price bracket recommended for your community, open up a dialogue with the landlord who may prefer to offer you a reduction. In Abu Dhabi, rental prices have inched slightly upwards in some areas while other locations continue to be flat. Luxury units could see some pressure on rentals as demand from the high-end expatriate segment slows, although negotiating a reduction will be down to the landlord’s discretion. It may be tricky as we foresee a strong rental demand in the capital, particularly for quality buildings in newer areas. Looking ahead, we expect the market to absorb new residential supply in the affordable segment
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Source: Declan McNaughton, Special to Freehold
Managing Director UAE, Chestertons MENA