Clusters that saw drops during this period were International City (above), Sports City and Discovery Gardens, all three by an average 4 per cent. Image Credit: Pankaj Sharma/Gulf News Archives

Dubai: Prospective buyers are seemingly in no hurry to pick up property in Dubai — this disinterest is pushing prices even further into soft territory. Based on estimates by the consultancy ValuStrat, apartment prices in Business Bay saw a drop of 6 per cent in the second quarter of the year compared to what they were in the first three months.

Other clusters that saw drops during this period were International, Sports City and Discovery Gardens, all three by an average 4 per cent. Across the 26 locations tracked by ValuStrat, Dubai apartment and villa markets recorded declines by 2.5 per cent and 2.1 per cent quarter-on-quarter respectively. The median value for an apartment in Dubai is now Dh1,324 a square foot, while for villas it is Dh1,368 a square foot.

If the current level of declines were to continue through the rest of the year, that might be a prompt for undecided investors to finally get into the market. As things stand now, the pricing dynamic is very much in the buyers’ favour, with sellers expected to become even more generous with payment terms and incentives to buoy demand.

Sellers sticking to their price demands are finding no takers even for properties that have been listed for three to four months. By the looks of it, buyers are having it their way — no incentives are being offered on prices or payment terms, they are not interested.

By ValuStrat’s estimates, the year-on-year decline in Dubai’s home prices are around 11 per cent.

Official numbers also bear out the depth of the fall in transactional activity — the Dubai Land Department saw 64 per cent fewer residential deals registered in the second quarter against the earlier one, though average ticket sizes were ‘marginally’ higher at Dh1.6 million.

Developers and buyers will also be keeping close watch on another detail that will have its say on pricing pressures.

In the first six months, an estimated 5,400 homes were completed. For the full year, the supply of apartments is projected at around 26,100 apartment units and 2,400 villas. On the launch side, there were 18 off-plan residential projects in the second quarter and a further 5,000 units were added to the residential pipeline, slated for completion by 2019.

“Residential projects with approximately 3,000 units — initially scheduled for completion this year — are delayed and due for handover during 2016,” the ValuStrat report notes. “A further 26,200 apartments and 2,300 villas [are] to be completed in 2016.”

For the moment, at least, none of this is telling on residential rents. Outside of the city’s freehold clusters, in the main residential areas, rents are still firming up. Some of the hikes are over and beyond what the Land Department’s Rental Index suggests is ideal.

Clearly, the residential market is moving in a way completely at odds with what is happening on the sales side. Landlords are calling all the shots, refusing to buckle by lowering their rents even when their properties are lying vacant.

It remains to be seen whether an uncertain job market could induce landlords to change their ways.

According to ValuStrat’s estimates, rents at the locations it tracks were down 2.1 per cent in the second quarter from a year ago. “Overall residential asking rents [have] remained stable since the start of 2015,” it says.