Cityscape Global : Market to bottom out by end 2016
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The Falcon City scale model at the Cityscape Global 2016 event at the Dubai World Trade Centre.
Dubai - The three-day property exhibition is displaying some of the landmark projects being developed by Dubai Holdings, Nakheel, Emaar Properties, Dubai Properties, Deyaar and Damac
The UAE's real estate sector will witness further marginal declines in values over the next six months as the market looks likely to bottom out by year-end even as a trend towards affordable development persists with increase in single-unit buyers expected in 2017, a market forecast released at Cityscape Global said on Tuesday. Asteco, a leading real estate consultancy, said a protected five per cent decline in property value would be offset by potential increased transaction volume "as lower prices unlock demand and stimulate renewed interest from single-unit buyers for soon-to-be-completed buildings." The special Cityscape report on the current status of the UAE real estate market revealed a general slowdown in all emirates while highlighting marked differences between Abu Dhabi and Dubai. "Dubai experienced a slow first six months, but for different reasons, with developers slowing the pace of project completions and handovers due to the forecasted oversupply of residential properties in the market, which prompted a slight decrease of around two per cent and one per cent respectively on rental rates for apartments and villas," said the report. The report said the cumulative effect of falling oil prices and the resulting cuts to government budgets over the last 18 months has been the catalyst for the slowdown in Abu Dhabi, where resulting job cuts in the last 6-8 months led to first half residential rental rate declines of three per cent on average, with high-end units down by four per cent; and a subdued sales market. "We are seeing two unique pictures emerge for the residential sector in both emirates. What is interesting to note in Dubai is the decision of families to downsize and even send spouses and children home in an effort to save money," said John Stevens, Managing Director, Asteco.
I visited Cityscape today: 300 exhibitors from 30 countries with Dhs3 trillion in real estate projects on show pic.twitter.com/iDXU8NxjtF - HH Sheikh Mohammed (@HHShkMohd) September 6, 2016
"We are seeing signs of this in Abu Dhabi with a migration or downsizing mainly from high-end large units, to more affordable developments; which has led to a rise in vacancy rates for larger units and which could prompt an increase in rental rates for smaller units in more desirable buildings," said Stevens. According to Asteco, Dubai added 2,000 new primarily mid-level and affordable apartments and 200 villas and townhouses in first half of 2016, with affordable developments such as Siraj Tower at Arjan and 400 units in Dubai Silicon Oasis; the mid-range Ajmal Sarah Tower and Dubai Sports City, Canal Residence West; and, at the top end, Palm Jumeirah's Osaimi Apartments. The Asteco report said apartment prices in most communities continued to be under pressure with an overall price reduction of three per cent during the first half, however prices are still 64 per cent higher than 2011. "For the villa market, rates were broadly stable over the last six months with an average increase of 0.3 per cent, with a trend towards smaller two to four-bedroom homes in communities such as Arabian Ranches, The Springs and Mudon, still prevalent," said the report. Stevens said from a rentals perspective, demand for studio, one and affordable two-bedroom units is likely to remain strong, with a potential increase in rates in some areas as occupancy levels improve," said Stevens. Limited supply of new released supply in Abu Dhabi in the first-half helped to limit any major reduction in rental rates with just 800 apartments added, including Wave Tower on Reem Island, resulting in an overall drop of three per cent. This trend was replicated in the villa market, however at a reduced rate of just one per cent. Stevens noted that transaction levels in the capital have been largely quiet with asking rates still relatively high in comparison to other emirates (nominal two per cent decline recorded) despite owners putting units back onto the market; and the ongoing lack of affordable units stymieing prospective investors with limited budgets. - issacjohn@khaleejtimes.com
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