Apartments in some Dubai locations offer gross rental yields of 7.5 per cent in the first quarter, the city’s property market staying relatively flat, according to the latest residential market report from Chestertons Mena, the international property agency. Yields for villas averaged 4.7 per cent across the city’s most popular affordably priced developments.
“Overall, market yields have retained some degree of attraction as we saw residential prices drop in the first three months of the year, with apartments proving to be the most successful option in terms of yield,” says Declan McNaughton Managing Director UAE, Chestertons MENA.
“And it is the secondary locations that are once again offering the highest yield, ranging from 7.7 per cent at Dubai Silicon Oasis to 9.5 per cent and 9.6 per cent respectively at Discovery Gardens and International City,” he adds. “However, despite ongoing sustained demand for affordable rental units, as end users look to reduce the cost of living by relocating to secondary communities, the villa segment still provided an overall average yield of 4.7 per cent, which is encouraging 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.
On average there was a 0.5 per cent decrease in apartment rental rates during the first quarter of 2016, with Downtown Dubai recording the highest drop of approximately 5 per cent. In secondary locations, a one-bedroom apartment is currently renting for between Dh55,000 and Dh73,000 with a two-bed unit from Dh75,000 and Dh95,000.
At the top end of the market, a one-bed in DIFC rents for an average of Dh118,000 per annum while a two-bedroom apartment is going for an average of Dh163,000.
In the villa rental market, Palm Jumeirah homes fared slightly better, registering a decline of just 2.5 per cent with three-bedroom villas renting for an average of Dh325,000 and four-bed residences for Dh448,000. Mudon is the most affordable villa community currently, with three-bed homes renting for Dh188,000 per annum and four-beds for Dh203,000.
“The outlook is less than rosy, however, with rental demand expected to be weak at current prices as the economic situation could adversely affect the disposable income levels of residents and we expect to see further correction of rental rates in the high-end apartment and villa segment as the year progresses,” McNaughton says.
The average sales price per square foot for residential units in the city stood at Dh1,221 in Q1 2016 with available supply of 461,000 homes. New supply accounted for just 1,100 units in the apartments segment and 46 and 14 units respectively at upscale villa communities of Jumeirah Golf Estates and lower end Jumeirah Village.
Average apartment sales prices recorded a negligible 0.7 per cent decline. Popular apartment developments that saw positive sales price movement included Dubai Silicon Oasis units at Dh826 per square foot against Dh785 in Q4 2015, DIFC up to Dh1,875 versus Dh1810, and Remraan at Dh807 versus Dh790.
The villa sales market recorded an average 1 per cent decline however Q1 2016 increases were seen in locations such as Victory Heights which was up to Dh1,195 per square foot, against Dh1,185 in Q4 2015
“It was a positive first quarter for transactions, with a quarter-on-quarter increase of 11 per cent, which amounted to total transaction value of Dh27 billion. We also saw mortgages approvals jump by over 50 per cent, which is encouraging,” remarked McNaughton.
In the office market total transactions equated to Dh778 million, down 7 per cent from Q4 2015. March recoded a 30 per cent increase on February figures with sales and rental rates increasing in Business Bay, JLT, Dubai Silicon Oasis, DIFC and Tecom.
