Dubai: Prices for UAE property came down again in the last quarter at an average of 4 per cent, with villas performing the strongest, according to Colliers International House Price Index, suggesting a trend for the remainder of the year.
"We anticipate a further slowdown and we have an ongoing concern of the new supply entering the market, which will further impede recovery," said Ian Albert, regional director, Colliers International.
Another 33,000 units expected to come online by year end are the main reason to be less optimistic about the market despite stabilising since the steep high and subsequent drop of 2008 and 2009. However, some of the supply could be further delayed into 2011, but current occupancy figures suggest that there is enough on the market as it is.
"There are already more than 340,000 residential properties in Dubai with an average occupancy rate of 87 per cent, with further declines anticipated. The market simply cannot absorb the additional supply unless the population grows and/or the release of stock is slowed down," Albert said.
House prices are back to the earlier parts of 2007 yet, according to the Colliers Index, house price values overall still enjoyed a 7 per cent increase when comparing the second quarter of last year with the current one. The index is based on statistics of lenders transactional prices and sets the blended average house price for the second quarter at about Dh1,014 per square foot.
Villas fared better than apartments, comparing this quarter to the first of this year. The former decreased by only 3 per cent, whilst the latter's prices fell 5 per cent. Interestingly, townhouses took the biggest hit of an 8 per cent price reduction.
"The reason why townhouses have taken a larger hit than villas is simply because as the market corrected, many families upgraded to villas as more became available and affordable," said Tom Bunker, Investment Sales Consultant, Better Homes.
Reason he says, villas are typically larger and in most cases have a half decent back yard, sometimes absent in townhouses. "Many of the townhouse communities are a little more out of the way," he added.
Villas also trumped on the number of transactions with 49 per cent of the total, followed by apartments with 34 per cent and the 17 per cent remaining going to townhouses. Interestingly, buyers seem to spot value, the number of transactions has been 15 per cent higher this second quarter than in 2009's.
Popular villa communities are in the Emirates Living District thanks to the quick and easy access to Shaikh Zayed Road and beyond, said Bunker. The favourite within is The Lakes, reckons Kim Robinson, residential sales and leasing manager, Cluttons.
"The Lakes is an upgrade to The Springs. Prices dropped so much that families who are looking for space, better feel and facilities can now afford The Lakes independent villas. We recently sold one upgraded to a five-bed for Dh3.6 million net," she detailed. Others in vogue are the Montgomery Maisonettes, luxury townhouse type.
The average occupancy rate in Dubai's existing 340,000 residential properties is 87 per cent and is expected to decline, according to Colliers. With rents at half of what they were in 2008 the lack of return on investment is further subduing buyer's appetite, Albert said.
- 1 The Palm Jumeirah — Villas
- 2 Downtown Dubai
- 3 The Palm Jumeirah — Apartments
- 4 Dubai Marina
- 5 The Lakes — Villas
Top 5 developments by number of transactions
- 1 Arabian Ranches
- 2 The Springs
- 3 Victory Heights
- 4 Downtown Dubai
- 5 Green Community
Source: Colliers International Q2 Dubai House Price Index