Residential developments at the Victory Heights community in Dubai Sports City, where a big chunk of new homes will be delivered this year Image Credit: Gulf News Archives

To fully understand what will happen to property prices this year, we need to look at the whole picture, including what transpired last year. In 2016, the stronger US dollar, relatively lower oil prices and resultant liquidity conditions impacted the purchasing power of regional and foreign investors traditionally active in the Dubai real estate market, such as GCC nationals and buyers from countries such as India, the UK and Russia.

Residential property prices in Dubai have declined by over 15 per cent since the highs seen in the second quarter of 2014. Apartment prices in Dubai declined by 0.3 per cent on average during the fourth quarter last year and by an average of 3.4 per cent over the past 12 months. Villa prices decreased marginally in the fourth quarter, with an overall average drop of 0.2 per cent. Over the past 12 months, villa prices have declined by 3.6 per cent on average.

In addition, redundancies among high-income jobs have kept net job growth at low levels, and residential demand is primarily driven by job growth for expats. In comparison, residential supply continues to expand with about 61,000 units scheduled to complete this year, although delays are likely to reduce actual delivery.

Q4 2016 completions

Approximately 3,500 residential units have been completed during the fourth quarter, taking the total completions for the year to nearly 16,400 units. Nearly 84 per cent of the total number of units completed in the fourth quarter were apartments, the majority of them located in Dubai Silicon Oasis and Dubailand. Furthermore, 58 per cent of the units delivered were projects delayed from the first three quarters.

New launches in the fourth quarter include the affordable housing project Rahaba Residences by Dubai Properties in Dubailand. The first phase of the project will have 200 studio units ranging from 27-36 sq m. Another Dubailand launch was the Miraclz Tower by Danube, featuring 591 fully furnished apartments ranging from studios to two-bedders. Select Group launched Studio One in Dubai Marina, featuring studios, one-bedders and two-bedroom apartments. The anticipated completion date is December next year.

Pipeline 2017

The majority of residential units set to be delivered this year are located in Dubailand, followed by Business Bay and Dubai Sports City. Apartments comprise approximately 76 per cent of the scheduled supply and nearly 13,000 units have been delayed from 2016 to 2017.

In Dubailand, new supply will be released in Akoya, various communities in Arabian Ranches II and Mira within the year. This will have a direct effect on older communities such as the original Arabian Ranches, as buyers have more new units to choose from at the same or even lower prices. Sale and rental prices are likewise expected to adjust and correct accordingly in the area.

Marginal declines are expected to continue this year in Dubai and a turnaround will be largely dependent on oil prices and the movement of the US dollar.