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Marginal price declines continue, averaging 1.0% year on year for apartments and villas in Dubai and Abu Dhabi in Q1 2017
Average rents in Q1 2017 have declined moderately compared to the fourth quarter
Cavendish Maxwell Residential Survey reveals that for Q2 2017 the majority of agents predict apartment and villa prices as well as rents to remain unchanged
Cavendish Maxwell has released its Q1 2017 residential reports providing analysis and summary of apartment and villa properties in Dubai and Abu Dhabi. The reports highlight price movements, rents and yield scenarios, residential supply as well as the macro-economic factors impacting this segment.
Marginal price declines continue in Dubai and Abu Dhabi, averaging 1.0% year on year for apartments and villas in Q1 2017. Cedre Villas in Silicon Oasis, apartments in International City clusters, IMPZ and Jumeirah Lakes Towers all experienced year on year declines of 2.0% on an average in Q1 2017.
In Abu Dhabi, apartments in Al Ghadeer, Al Reef Downtown and villas in Al Raha Gardens and Al Reef all experienced annual declines of more than 1.0% on an average in Q1 2017. “Continued downward pressure on housing demand is expected to continue in Abu Dhabi due to job uncertainty resulting from high-profile mergers of government-backed entities. These could also result in a readjustment of employee benefit packages such as housing allowances thus softening demand and resulting in further price declines,” said Sofia Underabi, Head of Residential Valuation at Cavendish Maxwell.
Apartment and villa rents across Dubai continued to decline in Q1 2017 and declines were more pronounced among studios in DIFC, International City clusters and Dubailand as well as 4 bedroom villas in Victory Heights. These categories of units exhibited QoQ% declines of more than 2.5%. “In recent months tenants have been able to negotiate terms downwards on renewal and the number of landlords offering flexibility to pay annual rent through multiple cheques has increased. Employers are slowly replacing housing allowances with monthly salary components and hence tenants are likely to continue negotiating on both rent as well as multiple cheques,” said Underabi.
Apartment and villa rents in Abu Dhabi investment zones continued to decline in Q1 2017 and declines were more pronounced among 2 bedrooms in Al Raha Beach and 4 bedroom villas in Al Raha Gardens. “These categories of units exhibited QoQ% declines of 2.2% and 3.3% respectively. Larger units are facing occupancy pressure from weakened demand as job insecurity continues in the Emirate, especially for senior level executives,” said Manika Dhama, Senior Consultant at Cavendish Maxwell.
Off-plan sales accounted for the majority of total transactions in Q1 2017. International City and Dubai Marina led the transferred sales table for apartments this quarter, while the top locations for off-plan apartment sales were Downtown, Lagoons, Dubailand and Dubai South. For villas, the majority of transferred sales were completed in Emirates Living and Reem (Mira). The most active villa communities for off-plan sales were Townsquare, Dubailand and Arabian Ranches II. “For non-occupier investors, locations with high net yields and/or low occupancy risk such as International City and Dubai Marina continue to remain attractive. First-time buyers/end users looking for homes are more likely to prefer taking out a mortgage. Since banks typically prefer lending against completed properties, areas where prices have stabilised are likely to remain attractive”, according to Lynnette Abad, Partner at Property Monitor.
Approximately 2,500 residential units have been handed over across Dubai during Q1 2017. Nearly 88% of the units handed over in Q1 were apartments in areas such as Jumeirah Village Circle, Sports City, Silicon Oasis, Dubailand, among others. As of March, approximately 35,000 units are scheduled for handover for the remainder of the year. “Historically there has been a considerable gap between the number of units announced for completion and actual handovers. While some projects are delayed as a result of financing issues and extraneous factors impacting the residential market, the majority of delays over the last 12-18 months stem from a conscious staggered delivery schedule being set by developers. This acts as a supply control mechanism to align handovers with demand and project sales potential and to avoid flooding the market with units that cannot be absorbed,” said Dhama.
Approximately 1,200 residential units have been completed during Q1 2017 in Abu Dhabi investment zones. Nearly 83% of the total number of units completed in Q1 were apartments, with the majority of them located in Saraya, Corniche area. New project announcements during this quarter included Aldar’s mid-market housing at Reem Island and Yas Island communities as well as Manazel’s 2,500 affordable villa project in Ghantoot, which are part of the next phase of Al Reef development. There are an additional 7,800 units scheduled for delivery during the remainder of 2017, concentrated primarily in Abu Dhabi City and Al Reem Island.
Cavendish Maxwell Residential Survey
The Dubai report also draws on the Cavendish Maxwell Residential Survey conducted among agents in the emirate. For Q2 2017 the majority of agents surveyed predicted apartment and villa prices as well as rents to remain unchanged. In terms of transactions, 64% agents expect new buyer enquiries to increase, while 59% expect an increase in the number of agreed sales. The majority of those surveyed (55%) believe new seller instructions will also increase during the first quarter of 2017.