Offplan sales made up more than 70 per cent of transactions in Dubai during 2017. Image Credit: EPA

Dubai: Another quarter goes by and there is no stopping the decline in sales transactions and values within Dubai’s property market.

At this rate - and without something happening suddenly to turn things around - home prices in Dubai could continue to drop all through next year as well, according to projections put out by the consultancy JLL. And the next “growth cycle” will have to wait until the immediate years before the Expo 2020 opens in Dubai.

In the third quarter, apartment prices dropped a further 3 per cent compared with what they were during the second. In the 12 months to end September, values are down 11 per cent, confirming that Dubai is very much a buyer’s marketplace now. (For tenants, there is nothing much to cheer about with the Q3 decline limited to 1 per cent quarter-on-quarter, according to JLL estimates.)

But not enough people are buying right now - “It is noteworthy the overall decline is continuing with Q2-2015 representing the lowest level for both sales (4,000 transactions) and values (Dh5.9 billion) since mid-2011,” said Craig Plumb, Head of Research at the regional operations of JLL.

“Data from Dubai Land Department show sales volumes peaked in 2013 (33,800 transactions excluding land) and fell back significantly by around 30 per cent in 2014 (to 23,800 transactions). Value followed a similar pattern, peaking in 2013 and declining by 22 per cent in 2014,” Plumb said.

Prospective buyers out there keep on biding their time - “This is the stage where any buyer knows you can get the best bargains,” said Juwaad Beg, CEO of Al Madina Al Raeda Real Estate. “There’s no rush to buy today because many believe they could get even better deals later on.

“However, while transaction levels are way down, conversion rates are still healthy at the luxury end. Where there used to be 10 enquiries before and two people buying, these days you still do get the two transactions even if the number of enquiries are less than five.”

But action could perk up in the mid-tier space of the market, with developments such as Dubai South’s ‘The Villages’ and ‘Jebel Ali Gardens’ from Nakheel being likely beneficiaries.

As regards The Villages, “I have seen few large advertisement banners for this project across Dubai... however, starting prices appear to be kept very clandestine at this stage,” said Adam Price, Managing Director - Middle East at Select Property Dubai.

“I would predict prices will probably be around Dh1,000 a square foot for prime projects offering a good quality of finish. We are seeing an increase in the number of mid-level investors. Typically, demand from this segment appears to be in areas such as Jumeirah Village Circle and more specifically the Al Barsha South region which offers a better value for money,” he said.

Delivery of new homes take a hit in Dubai

In what could have far reaching consequences for stability in Dubai’s real estate market, there is now a clear dip in the number of completed homes. While the third quarter saw 1,700 units delivered, ‘a number of projects initially scheduled for handover in the second-half of 2015 have been delayed to 2016-17, as the market continues to to soften and developers phase projects in line with demand, the JLL report states. Despite a few major launches, many of the projects on display at this year’s Cityscape were re-launches of previously announced schemes, most of which are likely to materialize only if developers are able to secure sufficient funds from pre-sales.

One positive the market can still enthused by is that the average selling price has not fallen significantly, “suggesting there are relatively few distressed sales occurring,” said Craig Plumb at JLL. “The average sale price during Q2-2015 was around Dh1.463 million. While this is down by around 13 per cent from the same period of 2014 (Dh1.65 million), it remains ahead of the average for all sales in Q2-2013.”