- Broker Directory
- My Tools
- News & Advice
- Market Trends
- Other GN Sites
Our H1 2016 UAE market report doesn’t hold any real surprises with the general overall slowdown in all emirates persisting through the latter part of the period, but we have seen some marked differences between demand and movement in Abu Dhabi and Dubai.
We are seeing two unique pictures emerge for the residential sector in both emirates. In Dubai, the first half of the year was characterised by developers choosing to slow the pace of project completions and handovers due to the forecasted oversupply of residential properties in the market, and this prompted a slight decrease of around 2 per cent and 1 per cent respectively on rental rates for apartments and villas.
In Abu Dhabi, the cumulative effect of falling oil prices and resulting government budget cuts of the last 18 months was the catalyst for the slowdown in the capital. Job cuts in the last 6-8 months led to H1 2016 residential rental rate declines of 3 per cent on average, with high-end units down by 4 per cent, and a subdued sales market.
Downsizing and migration
What is interesting to note in Dubai is the decision of families to downsize and even send spouses and children home in an effort to save money. We are also seeing signs of this in Abu Dhabi with a migration or downsizing from high-end locations like Reem and Saadiyat Islands to more affordable developments. This has led to a rise in vacancy rates for larger units, which we believe could prompt a surge in rental rates for smaller units in more desirable buildings as we move towards the end of the year.
If you look at new stock, Dubai added 2,000 new primarily mid-level and affordable apartments and 200 villas and townhouses to the mix in H1 2016.
We have also seen substantial interest in Jumeirah Village from both end users and investors, with buyers recognising the potential of the community from a locational point of view in comparison to newer projects launched south of Mohamed Bin Zayed Road.
Apartment prices in most communities continued to feel the pressure with an overall price reduction of 3 per cent during the first half of 2016. However it’s encouraging to note that they are still 64 per cent higher than 2011, when, on average, they languished below Dh800 per square foot. For those eyeing the villa market, rates remained broadly stable over the last six months reflecting a nominal average increase of 0.3 per cent, with a trend towards smaller two to fourbedroom homes in communities such as Arabian Ranches, The Springs and Mudon, still prevalent.
Arabian Ranches and The Springs were also the most transacted areas over the quarter, with Mudon recording strong levels of demand. Jumeirah Village Triangle (JVT) townhouses saw a reduction on the number of transactions as competition from Mira, for instance, made the area seem less attractive. Indeed, Mira offered three bedroom townhouses from as low as Dh1.2 million, which is typically the price of a one-bedroom townhouse in JVT.
With the question on everyone’s lips’ ‘what does the market look like for the next six months?’, we expect to see further marginal declines in values as we move towards a bottoming out scenario. But, on the flip side, we are also looking at a 5 per cent decline – at most.
With single buyers/occupiers expected to enter the market as sentiment improves we could see a further increase in transaction levels. So, for prospective buyers, the window of opportunity could be closing by year-end, especially if affordability is the main driver.
The bottoming out could, however, be offset by potential increased transaction volume as low prices unlock demand with renewed interest from single-unit buyers for soon-to-be-completed buildings. And from a rentals perspective, demand for studio, one and affordable twobedroom units is likely to remain strong, with a potential increase in rates in some areas as occupancy levels improve, which is definitely worth noting.
For landlords in Abu Dhabi, the limited supply of new H1 released stock helped to constrain any major reduction in rental rates with just 800 apartments added including Wave Tower on Reem Island, resulting in an overall drop of 3 per cent. This trend was replicated in the villa market, but at a reduced rate of just 1 per cent.
Transaction levels in the capital have been largely quiet with asking rates still relatively high in comparison to other emirates. We recorded a nominal decline of just 2 per cent - despite owners putting units back onto the market.
And we are still seeing good demand for affordable products like the Al Ghadeer and Al Reef townhouses, with no decline in sales prices, which confirms the appeal – and dearth - of this kind of product in market.
Up in the Northern Emirates, where market movement is defined by activity in neighbouring Dubai, it’s been a very quiet first six months of the year, although the recent move by the Sharjah Municipality to double the rent contract attestation fee from 2 per cent to 4 per cent of total annual rent could force tenants to rethink relocation plans and upgrades until rates drop further.
Source: Property Weekly