Off-plan real estate transactions in Dubai increased 60 per cent in 2017, compared to the previous year, according to a report by leading international property company Chestertons Mena.

The figures follow a steep increase in the volume and value of off-plan transactions in the second half of the year, with Dubailand, Business Bay and Al Furjan seeing the highest demand, compared to the Lagoons, Downtown Dubai and Business Bay, which achieved the highest values, stated the real estate expert in its latest Observer: Dubai Q4 2017 report.

“In terms of residential property transactions, off-plan dominated the market throughout 2017. Going forward we expect the off-plan market to decrease as the addition of new supply would suggest it will be ready units that will see an increase in demand,” remarked Ivana Gazivoda Vucinic, the head of consulting and valuations and advisory operations at Chestertons Mena.

From a transaction value perspective, The Lagoons achieved values of almost Dh800 million ($218 million), closely followed by Downtown Dubai (Dh780 million) and Business Bay (Dh759 million).

In comparison, Dubai Marina dominated the completed units market along with International City and Emirates Living, said the Chestertons’ report.

Dubai Marina and Emirates Living also took the lead for transaction value, both reaching Dh800 million, closely followed by Downtown Dubai with values of Dh450 million, it stated.

According to Chestertons, in the rental market, apartments and villas witnessed a three per cent drop.

The introduction of new stock, by way of delayed 2015 and 2016 projects, and the addition of attractive lettings incentives such as rent-free periods and multiple cheques, encouraged tenants to seek better deals, it stated.
 
While this was good news for tenants, it has increased downward pressure on rents in most communities for landlords, said the expert.
 
Despite the increased demand for smaller units due to their relative affordability, rents for studios and one-bedroom units fell across all communities by 2 per cent compared to Q3. Rents in Dubai Sports City recorded the steepest decline at 7 per cent whereas there was no change in rents for apartments in JVC.

"The softening of rents is expected to continue during 2018 as tenants’ pressure landlords to offer more preferential leasing terms," observed Vucinic.

"Additionally, other factors such as new stock entering the upper and mid-prime residential segments, coupled with the flat economic sentiment, will also exert downward pressure on Dubai’s rents," he stated.

In terms of villas, all communities experienced falling rents with the exception of The Springs, which continues to be popular as an established community with a wealth of amenities.

Arabian Ranches witnessed a precipitous drop in rents during Q4 2017 compared to Q3 with rents down an average 9 per cent due to additional stock and residents downsizing. In contrast, rents remained unchanged in Jumeirah Islands while they increased by 1 per cent in The Springs.

Overall sales prices for apartments and villas in Dubai weakened by 2 per cent and 6 per cent, respectively compared to Q3.

Softening demand due to economic uncertainty, combined with excess supply of residential units, brought further correction. However, the volume of ready units transacted increased Q-o-Q by 2,839, said the report.

Apartment prices in The Greens saw the steepest correction, down 12 per cent due to now coming more in line with decreases seen elsewhere, while prices remained robust in Dubai Sports City, The Views, and JVC owing to their relative affordability. On the other hand, prices across all villa communities except The Springs registered a decrease, it stated.

"Dubai’s residential prices and rents are projected to face further correction in 2018. Buyers can expect more incentives from developers for off plan projects due to the increased competition and greater affordability of the ready units," remarked Vucinic.

"Additionally, short-term demand is expected to be buoyed as Expo2020 draws closer," he added.-TradeArabia News Service