Dubai: The Dubai real estate market maintained its positive performance in the second quarter as retail and hotel sectors continue to experience growth, a real estate investment and advisory firm said in its latest report.
“Although the residential sector saw prices and rents increase across most areas, there are signs that the rate of growth is slowing down as the second quarter experienced a marked slowdown in the volume of residential sales, particularly in respect of existing villas,” said Craig Plumb, head of research at JLL Mena.
Average sale prices grew by six per cent in second quarter, down from 10 per cent in the previous quarter. With signs of reduced sales activity (particularly in the secondary villa market), it is likely that asking prices in this sector will decline further in coming months.
Sales volumes have declined in all sectors recently, with data from the Dubai Land Department showing villa sales in May 2014 down by almost 50 per cent on the same month in 2013.
The continued economic growth has improved sentiment and generated demand for commercial space, the high level of both current vacancy and future supply continue to constrain the market. The Dubai office market operates as a number of quite different submarkets, based upon location, tenure (strata or single ownership), licence structure (free zone/onshore) and quality. While overall market vacancies remain high (25 per cent), there are pockets of shortage that have resulted in major occupiers seeking to have new space built for their requirements rather than occupy sub optimal space in existing buildings.
With limited additions to stock and continued interest from retailers, Plumb said that rents in the best performing super regional malls have increased by as much as 12 per cent. Increases have been more modest in smaller centres and secondary malls but the retail sector has benefitted from higher spending from both tourists and local residents.
“Confidence in the retail market is reflected in the announcement of the Mall of the World [a planned new mall] around twice the size of the Dubai Mall, on Shaikh Zayed Road,” Plumb said.
Despite the completion of around 1,500 additional rooms in the second quarter, the Dubai market continues to grow, recording the highest Rev-PAR levels since 2008.
Average occupancies remained relatively stable at around 85 per cent during the year to May 2014, with room rates increasing by three year to $276 (Dh1,013) making Dubai one of the strongest performing hotel markets globally.