Despite a substantial rise in new stock, the residential and office markets in Dubai, UAE, still remain broadly stable, a positive indicator after a period of significant rental and sale price growth over the past two years, said a report.

The year-on-year, residential sale transactions registered a significant drop in overall value terms, falling 20 per cent during the first quarter, whilst volumes also declined by around four per cent, stated real estate consultancy firm CBRE in its 'Q1 MarketView for Dubai Market.'

However, on quarter-on-quarter basis, there has actually been a rise in both transaction values and volumes, it added.  

During the first quarter, the total sales transactions in Dubai were valued at Dh6.39 billion ($1.73 billion) with 3,896 transactions completed. This compared with a value of Dh4.55 billion ($1.23 billion) and 2,573 deals during the previous quarter.

However, it was not sufficient to avoid a decline in average sales rates, which fell by around two per cent over the quarter, stated the CBRE in its report.

"Strong economic fundamentals and increased government spending towards infrastructure projects have been instrumental in maintaining a healthy equilibrium across the real estate sector, during the first quarter," remarked Mat Green, the head of Research & Consultancy UAE.

“Around 0.42 million sq m of new office space and 16,000 residential units (apartments & villas) entered the market during 2014, helping to control rental inflation in the second half of the year," he added.

Dubai Marina/JBR recorded a total transaction value of Dh1.08 billion ($294 million), spread across 512 deals, while Palm Jumeirah remained the most expensive in terms of transaction value per deal. The development recorded total sales measuring Dh0.815 billion ($221.6 million) across 145 deals, which calculated to an average deal value of Dh5.62 million ($1.52 million).

This reflects the significant influence of villa sales on the overall transaction values, stated the CBRE in its report.

“The residential leasing market has remained broadly stable for a third consecutive quarter, with only minor changes in rental rates recorded. The markets relative stability during the past nine months is reflected in the huge swing in growth figures from 27 per cent in the year to first quarter of 2014 versus three per cent for the same period this year,” remarked Green.

Within the apartment segment, emergence of new supply and traffic related issues has led to drop in rental rates in few residential districts while other developments with improved infrastructure and retail facilities maintained healthy rental rates, mentioned the CBRE report.

Districts which have witnessed a drop in rates include Al Nahda, Al Barsha, International Media Production Zone, Motor City and Liwan, whilst the gainers included Jumeirah Lakes Towers, Discovery Gardens and Karama, according to the CBRE report.

The Villa/townhouse rental rates remained largely unchanged during the quarter, with smaller two-bedroom unit types witnessing an increase of around one per cent quarter-on-quarter, while larger three to five bedroom units experienced a drop of close to one per cent during the same period.

This has been driven by an increase in the supply of villa units, a trend that is likely to gather pace over the next 12 months, stated the property expert.

According to Green, the villa market witnessed the addition of roughly 3,000 new units during 2014 which has to an extent helped to balance rental inflation.

"Rental rates for six and seven bedroom units remained unchanged due to more limited supply availability.  The most significant rental declines were noted in Jumeirah Village and The Villa developments, which registered a drop of three and four per cent respectively quarter-on-quarter," he noted.

On the office sector, CBRE said the rental prices remained steady during the quarter with the average CBD rates unchanged at Dh1,885 ($513)/sq m/annum while year-on-year the increase has been marginal at three per cent.

“Positively, Dubai hasn’t experienced a slowdown in demand as a result of the declining oil price, largely due to the diverse nature of the emirate’s economy and the UAE’s position as the regional business hub,” further commented Green.

The total office stock as of the first quarter of 2015 measured 8.1 million sq m with an addition of approximately 40,000 sq m from the Dubai Design District delivered during the quarter.

On the 2015 outlook, Green said: "The delivery of a significant number of new units this year, will add further pressure to the residential market. The leasing market which has remained stable over the past three quarters is expected to witness increased landlord incentives in the form of rent-free period and other allowances, whilst rental declines are also likely in some areas."

He pointed out that the average sales rate for residential properties had dipped by two per cent quarter-on-quarter and was expected to see further drop during the course of the year.

"The commercial office market is anticipated to see continued strong demand across major freezone locations. However, the current global economic situation could lead to an elongation of negotiation and deal periods, as head offices in Europe and the US take longer to sanction moves amidst on-going uncertainty, low oil prices and rising regional unrest," he added.-TradeArabia News Service