Dubai: Property sale prices and rents in Dubai continued to decline in recent weeks on the back of slowing real estate transactions, a new report claims.
In the first six weeks of the second quarter this year, property numbers continued to fall, with apartment sale prices dropping 1.5 per cent, marginally tightening yields, and rents declining a nominal 2.4 per cent.
Other sources, however, said that the rent decline is not across the board, with some areas in Dubai, including Karama, Deira, Jaffliya, and those close to the Dubai Metro still registering upward movements.
Phidar Consultancy said that sale prices for villas decreased 2.9 per cent and rents dropped 0.6 per cent. While prices fell, fewer investors seemed to snag new properties in Dubai compared to 2014, with apartment transaction volumes posting a 1.5 per cent decline from a year earlier, according to figures released by Phidar Consultancy.
“The ongoing erosion of sale prices is a healthy correction. The more significant concern is the scale and nature of the upcoming launched and announced projects,” said Jesse Downs, managing director of Phidar Consultancy.
Analysts had earlier said that the lack of demand for luxury properties, weakening of oil prices and strengthening of the US dollar are causing prices in Dubai to fall.
Reidin announced early this month that Dubai’s residential property sales price index in Dubai dropped in April 2015 compared to a year earlier, with apartment prices dropping 0.87 per cent and villa costs declining 1.84 per cent.
However, Dubai’s real estate market is still doing well compared to other markets. Certain areas in Dubai, especially Deira, Karama and those close to the Dubai Metro also remain immune to price fluctuations and have posted rental increases, according to property portal Bayut.com.
In terms of property values, premium locations like Dubai Marina and Downtown Dubai, where fewer developments are underway, remain unaffected by price movements. The areas that have posted price declines are the ones where a huge supply of new units is expected.
“Apartments in the emirate are still delivering better returns than Hong Kong and London, and continued government investment is set to kick things up another notch,” said Haider Ali Khan, CEO of Bayut.com and co-founder of Zameen.com.
“Returns from large to small apartments in Dubai range from 5 per cent to 7.5 per cent, while those in cities like Hong Kong, Singapore and London average somewhere between 2 per cent and 3.5 per cent.”
Khan said that property values increase due to a number of factors, including speculative buying and “anticipatory sentiment of investors”.
“We think the market is currently letting go of that speculative pricing layer, which once peeled, would result in a more holistic price level. We continue to believe that the current easing of prices is a result of market correction that will soon peg the demand and supply forces at a sustainable level.”