The volume of transactions in the first five months of the year has been higher than the same period last year, with Dubai Land Department data indicating more than 11,000 residential transactions from January to May compared to 14,800 transactions this year. The majority of the transactions this year have been for under-construction properties, with the most active communities being Reem (Mira), Emirates Living, Arabian Ranches for villas/town houses and Dubailand, Lagoons, Downtown and Dubai Marina, among others, for apartments.
Historically, transaction activity slows during the summer months before picking up again from September. The same is expected this year, though levels of enquiries may remain similar to previous months as potential buyers are still on the lookout for discount deals. Developers are responding with special Ramadan offers, such as Nshama’s offer providing 20/80 payment plan on all apartments and Damac’s Dh500,000 savings’ promotion that covers free items such as packing and moving, a three-night stay at one of Damac’s hotels and the Dubai Land Department registration fee of 4 per cent paid on the buyer’s behalf.
Such offers are typically provided every year around this time and are aimed at first-time buyers who are nearing rent renewals and can instead move up the property ladder through a purchase at these rates.
While seasonal sectors such as tourism and retail are more impacted than others during summer, factors such as the end of the school year in June also affects residential market activity. For instance, rent contract renewals for villas and town houses often coincides with the school year-end and hence any rent adjustments are likely to come into effect during the summer.
Companies have rationalised spending through job cuts and this could lead to exits by some families, while others may choose to relocate and save on rents. In some communities, tenants have been able to negotiate rents downwards on renewal, provided it is still in line with the Real Estate Regulatory Agency’s Rental Index and this is expected to continue over the coming months.
The expectation of a summer lull could also prompt landlords to offer incentives — such as rent-free periods and multiple cheque payments — to fill vacant homes. Additionally, new supply in the villa/town house segment, such as those in Arabian Ranches II, are expected to be handed over this July-August and may impact prices and rents in the area.
According to Property Monitor, the 12-month change in sales prices as of May ranges from 0 per cent to -4 per cent while rents have declined more significantly to as low as -8 per cent and -10 per cent in some communities, particularly on villas. For the second quarter, average prices and rents across Dubai are expected to remain largely unchanged, according to the Cavendish Maxwell Residential Survey conducted among agents in Dubai.
For Q2-17 the majority of agents surveyed predicted apartment and villa prices as well as rents to remain unchanged. In terms of transactions, 64 per cent of agents expect new buyer enquiries to increase, while 59 per cent expect an increase in the number of agreed sales. About half of those surveyed believe new seller instructions will also increase during the second quarter.
The writer is Senior Consultant at the Strategic Consulting and Research department, Cavendish Maxwell.
