Average values in the likes of International City (at Dh640 per square foot), Discovery Gardens (Dh760 per square foot), Jumeirah Lake Towers (Dh1,135 per square foot) have “stagnated” in the 12 months to end of the first quarter of 2016, according to a new update from Cluttons.
Another location where values have seen little movement is at International Media Production Zone (IMPZ) and located near Dubai Investments Park, at an average of Dh720 a square foot.
“The resilience of values demonstrates the emphasis being placed by buyers on areas they perceive to offer the best value for money, with homes priced between Dh650–Dh750 per square foot and Dh1,300 to Dh1,400 per square foot being in most demand,” the report adds. “This has helped to sustain values at these levels in some of the core locations in the city.”
But a category of properties at another location in the city continues to experience sharp volatility. Mid-range apartment units at Business Bay are down 12.8 per cent during the period to around Dh1,068 per square foot, the report adds.
But across the board, values for both ready and off-plan property are seeing less of the sharp falls witnessed at various points during 2015. So much so, developers have been emboldened to come out with new launches at prices on par or slightly above the prevailing market rates. The sentiment is that new launches will again show upward mobility after Ramadan and summer.
But in terms of actual deliveries this year, the market needn’t expect too much of it. Cluttons expects 7,058 units to be complete as against the 8,000 odd that did so last year. There might be a slight improvement to 10,299 units in 2017 and which could shoot up to 16,026 units in 2018. For that to happen, new locations such as projects in Dubai South, MBR City and Culture Village will have to pull their weight. The other big master-developments in the making, Dubai Creek Harbour and Meydan One, too would have built up scale by then.
After the 2018 highs, deliveries could fall back to the norm - about 9,786 units - in 2019.
“The number of villa and apartment handovers between now and 2018 is still quite evenly split,” said Richard Paul, Head of Residential Valuations at Cluttons UAE. “The overall stabilisation in the projected rate of handovers bodes well for the market as it hints at the potential for strong value rises once the planned residential handovers are absorbed by the market in two to three years’ time.
“This of course excludes smaller projects, which may increase the number of handovers slightly before 2018, although the impact of this is likely to be quite minimal,” Paul said.
The coming months will see a keen battle between off-plan and ready property sellers. According to industry sources, the extent of incentives a seller can offer will decide what sells and what stays on as unsold inventory.
It is still the investors who are the most active in the buying space. Trying to get end-users in sizeable numbers still remains a work in progress.
For that to change, banks will need to show more support on their mortgage lending.
“The number of buyers willing to commit to a 50 per cent loan- to-value ratio remains very limited,” says the report. “Not only are general affordability constraints hampering the residential market, a liquidity crunch across the banking system is manifesting itself in tighter lending criteria.
“This is set against the backdrop of a market where many buyers are now taking a ‘wait-and-see’ approach, which has resulted in some of the weakest levels of mortgages extended in the market’s history, according to anecdotal evidence from our banking clients.”
If they are lucky, Dubai’s tenants could avail themselves of a 3 to 5 per cent drop in their rents this year. and for those living in premium residential neighborhoods, this could even be in the range of 5 to 7 per cent.
“Job losses and relocations are having quite an impact on lease rental terms, and more so in the upscale communities,” said an estate agent.
Cluttons latest report affirms the negative sentiments that are swirling in the rental space. “Weakness in the jobs market tops our list of concerns, particularly if there is a spill over into sectors beyond nuance and banking,” it states.
“The weaker economic conditions across the region have resulted in the scaling back of the number of senior banking professionals based in Dubai. This has weakened demand for more luxurious rental accommodation and a turnaround in this trend is not expected in the near term.”
Source: Gulf News