Expert Eye - No surprises in current Dubai realty trends

Declan McNaughtonDeclan McNaughton

Our latest residential market report for Dubai, which we released at the start of May, won’t hold any great surprises for the investment community after a pretty flat end to 2015, with the first quarter of this year echoing the trend of the last six or so months.

But, it’s not all “no news-slow news,” with landlords in secondary locations continuing to benefit from higher rental yields, despite the drop in residential prices in the first three months of the year.

Apartments are yet again proving to be the most successful option, with a 7.5 per cent gross yield and 4.7 per cent for villas across the city’s most popular, affordably priced developments.

Looking at specific developments, Dubai Silicon Oasis (DSO) recorded a 7.7 per cent yield, and 9.5 per cent and 9.6 per cent, respectively for Discovery Gardens and International City. And these kind of figures are not to be sniffed at in the current depressed climate.

Villas are not faring too badly either despite ongoing sustained demand for affordable rental units as end-users look to reduce the cost of living by relocating to secondary communities.

The emirate’s larger homes are still delivering an encouraging overall average yield of 4.7 per cent, which is good news for investors in it for the medium to long term.

The Springs registered the highest investor yield at approximately 6.4 per cent in Q1, while apartment yields stood at 7.5 per cent with studios recording the highest yield figure at 8.4 per cent.

Downward pressure on rental rates continues to benefit tenants, although the decline is slow and steady.

In the first three months of this year, a 0.5 per cent decrease in apartment rental rates was recorded, with Downtown Dubai seeing the highest drop of approximately 5 per cent.

Look further afield for an affordable new home. In secondary locations, a one-bedroom apartment can currently be bagged for Dh55,000 up to Dh73,000 while a two-bedroom unit can range from Dh75,000 to Dh95,000.

At the top end of the market, a one-bedroom house at Dubai International Financial Centre is going for an average of Dh118,000 per annum, while a two-bedroom apartment rents for around Dh163,000.

For those with large families or generous housing allowances, the 2.5 per cent drop in rental rates for Palm Jumeirah villas means that a three-bedroom home can be had for Dh325,000 on average.

And there are still affordable villa options, led by the outlying Mudon community where a three-bedroom home is available for Dh188,000 per annum and a four-bedroom unit for Dh203,000.

Looking ahead, the outlook is less than rosy, however, with the rental demand expected to be weak at current prices as the economic situation could adversely affect the disposable income levels of residents.

Get ready to see further downward adjustment in rental rates, especially in the high-end apartment and villa markets.

If you are still keen to invest, the average sales price per square foot for residential units in the city stood at Dh1,221 in the first quarter of 2016 with available supply of 461,000 homes.

Average apartment sales prices recorded a negligible 0.7 per cent decline, with popular apartment developments like DSO and Remraam seeing positive price movement at Dh826 per square foot against Dh785 in Q4 2015 and Dh807 versus Dh790, respectively.

Perhaps, most encouragingly, and a good indicator of market confidence for the future, we also saw mortgage approvals jump by over 50 per cent – great news for prospective investors.



Source: Declan McNaughton, Special to Freehold

Managing Director UAE, Chestertons MENA


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