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As we move into Q4 2015, what were the Q3 trends in Dubai’s property market?
A general slowdown in the number of residential transactions in the secondary market was evident during summer as sellers and buyers had different price expectations. Newly launched products, however, did well either because the price or payment plan was reasonable, or an attractive return/incentive scheme was offered. Whilst overall average prices showed no change with the previous quarter, there were significant disparities between areas, with several under/outperforming the rest of the market. IPMZ showed a 3% QOQ growth, whereas Dubai Marina and Jumeirah Beach Residence (JBR) recorded a decline of close to 10% in Q3. The addition of 7,000 units in the second half of the year could well exert downward pressure on rental rates in the next few months and through to 2016 with 13,000 more apartments due for completion.
What was the sales overview for apartments and villas in Q3?
Overall, transaction levels for apartments were low as sellers who were in a position to negotiate did not need to sell, whereas buyer price expectations appeared to be 30% to 40% lower than the asking price. Overall, sales prices appeared to be on an overall downward trend despite this quarter not seeing a significant decline in the affordable and mid to higher end segments. The high to luxury end of the market, however, recorded a 2% decline on average during the quarter, with Dubai Marina and JBR witnessing drops of nearly 21%. For villas, the trend witnessed last quarter continued as buyers were after smaller, more affordable properties, whilst large, high-end villas were not in demand. Declines were witnessed in Arabian Ranches with a QOQ decline of 7%. Off-plan properties launched over the past years are now nearing completion and providing good alternatives.
Can you elaborate on the figures in terms of apartment rental rates?
After the decline witnessed in Q2, the overall rental rates in Q3 remained broadly unchanged, albeit with some upward and downward adjustments in select areas.
Looking to 2020 and beyond, with the number of off-plan projects launched over the last few years, together with project announcements made, the total supply could increase to nearly 70,000 units (apartments and villas).
These deliveries could lead to a continued downward pressure on rental rates, making Dubai once again a more affordable place to live and work.
This will also force landlords to become more competitive with offers adapted to end-user demand. Some landlords have already increased the number of installments, and, in some cases, even offered rent-free incentives. This trend was especially apparent around Al Nahda and Al Qusais where effective rental rates were down by 2%.
What were the trends witnessed in the capital of Abu Dhabi?
Whilst rental rates and sales prices in Abu Dhabi’s residential market saw a fast decline from early 2009 onwards, the market witnessed a significant growth since mid-2012.
This, as apartment and villa rental rates increased by an average of 18% and 9%, respectively until Q3 2015.
The growing confidence and improved sentiment in the Abu Dhabi market in the last two years resulted in a significant growth in rental rates and sales prices.
Nonetheless, the drop in oil prices began showing its negative effect, reflected by an overall investment slowdown.
Apartment and villa rental rates recorded a 28% and 16% increase, respectively, compared with their lowest points in Q2 2012.
Apartment sales rates, on the other hand, recorded a 55% increase during the same period.
Question of the Week:
Can you tell me about the sales prices of residential properties in Abu Dhabi?
The sales prices of apartments in Abu Dhabi remained unchanged in the last three months, although they continued to stand at 4% higher than values recorded in Q3 2014.
Projects located in Al Raha Beach and Saadiyat Island recorded the highest yearly increase.
Al Raha Beach’s Al Bandar and Al Muneera were up by 12% and 9%, respectively, whereas Saadiyat Beach Residences increased by 7% on average.
The only decrease, of 5% over the quarter, was recorded at Al Reef Downtown, as previous rates were higher than the perceived value to buyers.
This led to a slowdown in transactions and reduction in asking prices as sellers in the development adjusted their expectations.
Having increased substantially over the last few years, villa sales prices remained stable this quarter.
However, the average yearly increase was recorded at over 8% across the market, as Golf Gardens near Khalifa City and Al Raha Gardens in Khalifa City A achieved 17% and 12% growth, respectively.
The prices in Al Reef Villas, which is close to Al Raha Beach, have, however, remained stable over the last year, leading to improved rental returns for investors.