Dubai’s real estate market could be seeing the first signs of growing market confidence, said property services provider Chestertons, as a result of a notable slowdown in apartment sales price declines and the stabilisation of rental rates.

Transaction values for the year also underscored the positivity in the market with completed units witnessing a 60 per cent increase compared to 2018, and off-plan units recording a 99 per cent increase during the same period, Chestertons added in its new report titled “Observer: Dubai Market Report Q4 2019”.

 The volume of transactions was similarly positive in 2019 for completed and off-plan units, with a 39 per cent and 68 per cent increase compared to 2018.    

While green shoots are visible, supply is still the single biggest contributor to declining residential prices in the Emirate, 45,000 completed units were delivered in 2019 - the highest number of units in the last five years - with a further 90,000 units scheduled by developers to complete in 2020. While it is likely that a significant minority of planned projects will overrun their scheduled completion, the volume of units, by any measure, is clearly out of step with current market-wide sales performance.

Chris Hobden, head of Strategic Consultancy, Chestertons Mena, said: “The Dubai residential market in Q4 2019 is alluding to a more positive outlook for 2020 thanks to the slowdown of sales price declines and the levelling of rental rates.

“This does, however, have to be tempered by the volume of new units scheduled for delivery in 2020, which makes the short-term recovery of prices in the Emirate unlikely.”

In the sales market, average apartment sales prices were down 2 per cent in Q4, a notable slowdown from the previous quarter, while villas witnessed a 3 per cent decline during the same period. Business Bay, Dubailand, Dubai Marina, and The Greens were resilient with prices remaining unchanged from the previous quarter at Dh1,000 ($272) per sq ft, Dh700 per sq ft, Dh1,030 per sq ft and Dh847 per sq ft respectively.

Jumeirah Village Circle declined by 9 per cent, denoting the largest decrease in Q4 in the apartment market, from Dh685 per sq ft to Dh623 per sq ft. Motor City witnessed a price drop of 7 per cent, with apartments available for Dh585 per sq ft. More positively, The Views saw a price increase of 4 per cent, returning to levels witnessed in Q2.

In the villa sales market, average prices were down 3 per cent in Q4. Jumeirah Park witnessed the highest decline during Q4, down 8 per cent to Dh740 per sq ft. The Lakes observed modest declines of 2 per cent, and The Meadows, 3 per cent with prices dropping to Dh993 and Dh822 respectively.

The most resilient villa location was Arabian Ranches, which witnessed a price increase from Dh793 per sq ft to Dh808 per sq ft in the same period.

“Oversupply contributed to declining capital values in Dubai and has resulted in further price declines in Q4,” added Hobden.

From a rental perspective, no movement was witnessed in Q4, potentially signalling the long-term rental market has levelled out, with the sentiment further endorsed by the new draft law which would see rental rates fixed for three years upon the signing of a contract.  

In the apartment rental market, Downtown Dubai was the only area to record an increase in rates, largely down to new high-end units in the community, resulting in an increase of 8 per cent, with a typical two-bedroom available for Dh140,000 per annum. DIFC, Discovery Gardens, Dubai Silicon Oasis, Dubailand, International City, and The Views remained unchanged Q-on-Q.

Several communities witnessed an average 2 per cent drop-in rates, including Business Bay, Dubai Marina, and Motor City, whereas more pronounced declines of 3 per cent were seen in The Greens and Dubai Sports City. A one-bedroom in The Greens was available for Dh60,000 in Q4 whilst the same sized unit in Dubai Sports City was available or Dh45,000.

“To ensure high occupancy in 2020, landlords will have to be realistic in the face of tough market conditions. The incentives previously offered to tenants, such as rent-free periods, multiple cheques and short-term leases will continue, with an increase in tenant demand for monthly direct debit payments also likely,” added Hobden.

In the villa rental market, Arabian Ranches, The Meadows, The Lakes, Al Furjan, JVT, Jumeirah Islands, Jumeriah Golf Estates and Palm Jumeriah saw no rate change from the previous quarter, further underscoring that rates in these locations may have bottomed out, particularly when considering Jumeirah Islands, The Meadows, and Arabian Ranches, all witnessed declines of 11 per cent in Q2.

The greatest villa rental decreases were felt in The Springs with an average three-bedroom available for Dh140,000, denoting a softening of 3 per cent, and Victory Heights, where the same size villa was available for Dh125,000, a decrease of 4 per cent.

“Despite the challenging environment for landlords, due to falling rents, Dubai is still seen as providing decent yields in the long-term rental market, with the 10 most popular communities offering returns of between 6 per cent and 9.5 per cent. To put this in context, prime rental yields in major global cities such as London or Hong Kong, are currently below 5 per cent,” concluded Hobden.- TradeArabia News Service