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During Cityscape, we released our latest report highlighting stability in Dubai. This has been underscored by a continued focus towards the affordable segment, in contrast to the high-end market which experienced declines of up to 10 per cent.
Affordable apartment units at the International Media Production Zone (IMPZ), Discovery Gardens and Dubai Silicon Oasis (DSO) showed 3 per cent, 6 per cent and 2 per cent sales growth over the summer months, respectively, whereas Dubai Marina and Jumeirah Beach Residence (JBR) recorded a decline of close to 10 percent. Palm Jumeirah recorded a year-on-year reduction of 13 per cent.
Newly launched properties with reasonable price and/or payment plans, and healthy prospective return on investment (ROI) have been attracting solid investment interest, which will define market movement in the months to come as affordability remains a major driver for sales of properties in all segments.
The second half of the year will see around 7,000 units come online, and while average rental rates have been relatively stable over the last few months, albeit with significant differences between areas, we expect the new stock to exert further downward pressure in the next few months and through to 2016, with 13,000 more apartments due for completion.
Meanwhile, as expected, Abu Dhabi's residential market saw a general marketslowdown in transaction activity over the extended summer period, bar increased demand at Khalifa City for villas in particular, but rental and sales rates remained stable.
However, overall, the market is continuing its positive growth trend of the last 48 months.
With limited new supply levels, we expect rental rates to hold steady.
The annual rental rates of apartments and villas have increased by an average of 18 per cent and 9 per cent, respectively over the last three years, with the growing confidence and improved sentiment in the Abu Dhabi market over the last two years boosting investor ROI. However, the decline in oil prices has also prompted a general slowdown in investment this year.
Apartments at Al Raha Beach and Saadiyat Island recorded the highest yearly sales price increase with Al Raha Beach's Al Bandar and Al Muneera up by 12 per cent and 9 per cent, respectively.
Several new apartment developments were launched in the first half of 2015 on Reem Island, Yas Island and Saadiyat Island, with some, such as Meera in Shams Abu Dhabi, offering very competitive rates.
A strong demand for villas in well-masterplanned developments also resulted in good sales volumes for projects such as the recently unveiled Al Merief development and Nareel Island exclusively offered on a plot-sale basis to Emiratis.
On the other hand, apartment rental rates in the Northern Emirates also saw minimal changes over July and August with rents in Ajman, Umm Al Quwain and Sharjah remaining stable overall, with Ras Al Khaimah seeing a nominal 1 per cent decline.
The Al Majaz, Al Qassimiya and Al Khan areas of Sharjah also recorded a marginal decline, with a handful of new buildings coming online and landlords offering one-month free rents in a bid to secure high occupancies.
Reducing vacancy levels is a red flag for Sharjah's residential rental market, which is also increasingly in existing tenants' favour as they come into a stronger negotiating position when renewing their current contracts.
Source: John Stevens, Special to Freehold
The writer is Managing Director - Asteco