The rate of decline in residential property prices across key communities in Dubai has slowed over the last 12 months in comparison to 2016, while rents have continued to decline and led to yield compression in most communities, according to new figures from property consultants Cavendish Maxwell.
In its 2017 market review, Cavendish Maxwell noted that apartment, villa and townhouse prices registered a 12-month decline of 2 percent on average.
In terms of apartments, the sharpest price changes were recorded in the Downtown Burj Khalifa area (-3.5 percent) The Greens (-3 percent) and Business Bay (-2.8 percent). For villas and townhouses, the most drastic rent declines were found to be in Jumeirah Islands (-3.2 percent), Victory Heights (-3.1 percent) as well as in The Meadows and Arabian Ranches (-3 percent each).
Across Dubai, rents were found to have dropped an average of 4 percent throughout 2017, which resulted in yield compression in many communities. Of those examined, the steepest annual declines were found to be in The Greens (-5.8 percent), Al Furjan Villas (-5.6 percent), The Springs (-5.5 percent) and International City (-5.3 percent).
The report predicted that rent declines were expected to continue during the first quarter of 2018, with new handovers expected in freehold and leasehold communities in Dubai.
Additionally, Cavendish Maxwell notes that “a wave of mergers and consolidation” in various sectors affected jobs, which may lead to increased vacancy levels, and that VAT roll-out may also impact the recruitment plans of certain businesses, all of which may lead to a continued “subdued outlook” for rents in 2018.
On Wednesday, Cavendish Maxwell’s Jonathan Brown said that declines in rent and prices are signs of the UAE real estate market’s continued maturation.
“Referring to the 11 years that I’ve been in Dubai, the market continues to mature. The fact that rents are coming down…slightly quicker than prices is a reflection of the maturing market,” he said. “It’s a less volatile market where investors are willing to accept lower yields.”
“There’s less risk being built in, and people have far more confidence over the longevity and sustainability and long-term outlook of Dubai,” he added.
Andrew Love, Cavendish Maxwell partner and head of investment and commercial agency, noted that despite “negative sentiment” regarding Dubai’s office real estate market, data shows that inquiry volumes in 2017 have risen from 2016, although the conversion rate had decline slightly.
“We’re seeing this two-tier market come to exist now, where we have these secondary older buildings that are now obsolete, where we’re seeing rents fall fairly dramatically by 10 to 15 percent over the last two years, sometimes even 20, 25 percent” he said.
In Grade A offices, however, Love noted that “rents have actually stayed pretty stable”, with minor decreases of only up to 5 percent.
Looking forward to 2018, Love noted that an additional 200,000 to 300,000 square metres of office space will come on the market, mostly concentrated in the DIFC area.