The prime residential prices in Dubai, UAE, are expected to fall by 5 to 10 per cent and rents by up to five per cent this year amid a steady supply of new housing stocks, said a report.

In 2015, the new residential supply in the mainstream segment is expected to equate to around 5.5 per cent of existing stock, stated global property consultancy Knight Frank in its report.

On the same basis, the figure for the prime segment is projected to be closer to the two per cent mark.

In quarterly terms, Knight Frank said the residential price growth in Dubai entered negative territory in both the prime and mainstream segments during the third quarter of 2014, with the former seeing a 0.2 per cent fall and the latter a 5.2 per cent drop.

Moreover, the price indices experienced their second consecutive quarterly decline in the final three months of last year, it added.

According to Knight Frank, in recent months, the spotlight has been firmly on Dubai’s residential property sector, where – after trending up for a number of years – rental value growth has stalled and prices have begun to register falls.

In 2014, the total number of residential sales transactions across Knight Frank’s basket of mainstream residential properties were down 41 per cent compared to a year earlier.

Unsurprisingly, in annual terms, the second half of the year was notably weaker than the first, said the property expert.

On the investment part, Emiratis dominated the Dubai real estate scene last year pumping close to Dh22.8 billion ($6.2 billion) in key projects, stated Knight Frank citing data from the Dubai Land Department.

Among the expatriates, Indians emerged the largest buyers of real estate in Dubai investing a record Dh18.1 billion ($4.92 billion) followed by the Britishers with Dh9.3 billion ($2.5 billion) investment and Pakistanis with Dh7.6 billion ($2.06 billion), the report added.

On the hotel sector, Knight Frank said after overtaking London Heathrow as the busiest international airport last year, Dubai International is forecast to handle 78.4 million passengers in 2015. This in turn should provide another boost to demand for hotel rooms, which the emirate should be well placed to service.

Sustained weakness of the Rouble is expected to impact passenger numbers from Russia. At the end of last year, passenger traffic from Russia and the CIS experienced sharp annual falls, which in turn acted as a drag on hotel occupancy in Dubai.

Knight Frank said largely due to rising supply, the hotel sector had performed sluggishly in 2014.

Last year, Investment Corporation of Dubai (ICD) unveiled plans for a $1.4 billion, 46-storey Royal Atlantis Resort and Residences. The year also saw a number of hotel openings, including Four Seasons at Jumeirah Beach, Sheraton on Sheikh Zayed Road and Doubletree by Hilton in JBR and Al Barsha.

Commenting on the office sector outlook for 2015, Frank Knight said pockets of instability in the region were expected to continue pushing office occupiers to the safety of Dubai.

Also, with a number of office schemes due to be completed next year, tenants will have a range of accommodation to choose from, stated the expert in its report.
 
"Upcoming projects include d3 (Dubai Design District) and the Dubai Trade Centre District development, although there are other notable schemes due to be completed in Business Bay and Internet City. Finally, at DIFC, we expect increasing tenant movement as rents rise and new supply becomes available," it added.

Knight Frank said enquiries for industrial space strengthened significantly in 2014, but not all of these converted into actual take-up. However, this was largely down to the fact that available space for occupation remains low in Dubai, it stated.

The year-on-year, industrial rents in Dubai continued to see double-digit increases in 2014. On the same basis, Jebel Ali, Dubai Investment Park and Al Quoz saw the strongest rental value growth at the end of last year.

According to the expert, there has been growing interest in locations such as Dubai Investment Park and Dubai Industrial City from tenants requiring larger, and generally better quality units. These locations also offer longer ground leases, making them attractive options for those tenants planning for the long-term.

In 2014 overall, demand for industrial units was strongest from food and beverage units, as well as third-party logistics firms, it added.

On a more positive note, Knight Frank said the healthy expansion in the private non-oil economy underpinned strong rental value growth across the commercial property sectors last year.-TradeArabia News Service