With 25,000 residential units slated for delivery in 2015, rental rates in Dubai, UAE, will be impacted further, a report said, noting however that the decline could be neutralised in the wake of an increased demand for accommodation.

Considering the inflow of expats leading to the World Expo 2020, availability of affordable housing for the mid-income sector has become all the more relevant, added the first quarter Market Report released by Bayut.com, a top online property services company.

In terms of popularity and search trends, the market research tools of Bayut.com showed Dubai Marina to be on top of the list of the most sought-after localities for buying property in Dubai, followed by Downtown Dubai and Jumeirah Lake Towers.

Meanwhile, Abu Dhabi continued with its slow yet steady growth during the first quarter (Q1) of 2015. With the residential units located in central areas enjoying sustained rental price growth, property options of suburbs such as Mohammad bin Zayed City, Khalifa City A and B and Mussafah gained popularity among price-conscious residents seeking affordable housing alternatives in the emirate.

Dubai sale analysis

Studio, two- and three-bed apartments in Dubai saw moderate to good rises in prices quarter-on-quarter, while four- and one-bed apartments lost value and saw lukewarm demand in Q1 2015. Studio apartments experienced a 3.64 per cent quarter-on-quarter increase in prices on the back of strong demand and, according to Bayut.com’s stats for Q1 2015, the average price for Dubai studio apartments was Dh734,115 ($200,000).

Two- and three-bedroom apartment prices increased 1.11 per cent and 4.02 per cent respectively, across Q1 of 2015 in comparison to the same time period in 2014, with average prices in this year’s first quarter being Dh2.67 million and Dh3.8 million, respectively.

Meanwhile, the prices of one-bedroom apartments fell 2.77 per cent year-on-year and settled on an average price of Dh1.52 million. Four-bedroom apartments saw a very significant drop in prices, with a total year-on-year decline of 12.6 per cent, which affected average apartment prices in the overall analysis.

Collectively, apartment prices in Dubai decreased 5.76 per cent on average in this year’s first quarter compared with Q1 of 2014, owing largely to dwindling demand for and decreasing prices of larger (four-plus beds) apartments in the emirate.

The number of transactions also dropped 37.61 per cent in a quarter-on-quarter analysis conducted by Bayut.com based on figures obtained from the Dubai Land Department.

Dubai rental analysis

Increasing rents across the emirate during 2014 has resulted in a higher interest in the affordable residential options of Bur Dubai and Jumeirah Lakes Towers. These two localities even broke the dominance of Downtown Dubai across the year as the second-most favoured residential location for renting in Dubai. Business Bay also saw a commendable increase in interest due to the speedy development of the Dubai Water Canal and conversion of office buildings to residential spaces.

This year’s first quarter brought along an increment in all apartment types, the largest of which was a 15.29 per cent quarter-on-quarter rise in the studio apartment category. Rents of all the other apartment types saw a more controlled and gradual rise.

Expectations of an across-the-board decline in rental prices in Q1 2015 proved to be wrong, and the solid demand for residential units kept rents afloat in many localities while others did lose in rental value. However, owing to the residential units expected to be delivered later in the year, a wider quarter-on-quarter rental decline is still expected once the new units hit the market.

Abu Dhabi sale analysis

With the exception of slight bumps here and there, the real estate market of Abu Dhabi performed considerably well and continued to strengthen throughout the first quarter of 2015. Despite the general forecast of sustained growth across all segments, the market saw a drop in the prices and rentals of studio apartments, depicting a shift of buyers and tenants towards more spacious residential offerings in the emirate.

Abu Dhabi rental analysis

The residential offerings of Abu Dhabi continued with their upward trends in rentals during the first quarter of 2015. There was, however, a decrease in the rental prices of studio apartments, which coincides with the decrease in sale prices highlighted above.

The rest of the apartment categories experienced modest increases in rents during the first three months of 2015. Quality projects in free-hold areas, such as Khalifa City A, were the most sought-after and the occupancy rates were also seen to be increasing across all of their residential segments.

Final analysis

With a substantial number of additional units 25,000 slated for entry into the UAE market throughout 2015, the residential sector is likely to feel some pressure. This may force owners to offer lucrative incentives to prospective tenants, like rent-free periods and special allowances in the form of reduced rental values, in order to keep their holdings relevant and competitive.

The residential sector also registered a quarter-on-quarter dip of two per cent with respect to the rate of sale of units. Contrarily, office space rentals are expected to experience a consistent strong demand ahead of Dubai Expo 2020, especially those situated in various freezones.

Abu Dhabi is expected to continue with its sustained growth pattern in the residential market. With a limited number of expected units lined up and an increase in business and job opportunities, the emirate may see a subsequent rise in population of expats leading to a heightened demand. Stable growth trends are expected to continue even with the lack of interest in studio apartments among the residents. Investors with holdings in the suburbs of Abu Dhabi are set to see a period of increased interest as their assets continue to gain in popularity.

“We continue to see strong rental demand in prime areas and there are good bargains available in the market for investing in property. There is a healthy job market which continues to blossom and this bodes well for the real estate market in the years to come,” said Bayut.com CEO Haider Ali Khan. – TradeArabia News Service