The residential property prices in Dubai, UAE, fell 10 per cent in the first three months of the year due to a strong dollar and also because buyers had less cash to spend following the oil price slump, said a report.

The Dubai real estate sector has softened since late 2014 after a three-year boom fed by an influx of cash from politically unstable Arab nations, stated industry consultants JLL in a report.

But tougher borrowing regulations and higher transaction fees helped cool the market, with sales volumes slumping last year along with prices.

That trend has continued into 2016, JLL report stated, estimating apartment and house prices fell by 10 and 11 per cent in the first quarter year-on-year. Rents dropped 5 per cent over the same period, it added.

According to JLL, most segments in the real estate market in Dubai, UAE, softened in the first quarter, but long-term outlook still remains positive due to future growth drivers.  

A downturn in rental and sales indexes seems to be defining the Dubai residential sector, it added

During the first quarter, the general Reidin sales index recorded a drop of 10 per cent year-on-year (y-o-y), while the general rental index declined at a slower rate of five per cent.

In the same period, 2,200 residential units have been added, taking the total stock to 458,500 units. These include a range of apartments, villas, as well as townhouses across the emirate, stated the Dubai Real Estate Market Overview report, which assesses the latest trends in the office, residential, retail and hotel sectors.

Commenting on the report, Craig Plumb, the head of research at JLL Mena, said: "Various factors are bringing the market towards the bottom of its cycle. On one hand, the strong dollar is impacting the USD-pegged GCC currencies which is making Dubai real estate more expensive for buyers from non-USD pegged markets."

"On the other hand, the continued period of low oil prices is tightening regional liquidity which is also affecting the real estate market," stated Plumb.

"We are witnessing a continuing decline in the sales and rental indexes for both the Dubai residential and hospitality sector. Although occupancy rates are still considered high, but average rates continue to drop," he noted.

"However, our outlook for the retail sector is positive for most part of this year, despite a flat performance during the first quarter. We expect additional retail supply to enter the market during the second half of this year," he added.

On the hospitality sector, JLL said the occupancy rates during the period declined a mere two to 84 per cent y-o-y but these levels are still considered high.

In terms of supply, 621 rooms were added, with the delivery of Hilton Garden Inn Mall of the Emirates and Ibis Styles Hotel, it stated.

On the office market, JLL said it continues to be the worst performing sector and has been stuck at the bottom of the cycle for a number of years.

The first quarter saw the handover of B2B Office Tower and the new Dafza building, located in Business Bay and Dubai Free Zone Authority (Dafza), respectively. The two towers added 38,400 sq m of office gross leasable area (GLA), taking the total to 8.46 million sq m as of the first quarter of 2016.

"Nevertheless, we are witnessing some select activity and momentum for Grade A office buildings which continue to generate strong demand," remarked Plumb.

"Whilst the short- to medium-term outlook for the Dubai real estate market is less encouraging, we remain positive on the long-term outlook due to future growth and demand drivers like the Expo 2020 and other mega infrastructure developments," he said.

"Our 2015 supply number increased by 137,800 sq m, taking the total stock for the year to 8.43 million sq m. An additional 269,000 and 368,000 sq m of GLA is scheduled to be delivered in 2016 and 2017 respectively. However, we continue to remain cautious in terms of handover timings," he added.

On the retail sector, JLL said the average rents during the first three months of 2016 remained flat and occupancy rates at 92 per cent continued to show strong momentum across the retail segment.

In terms of supply, 233,500 sq m of GLA was added across Al Wasl, and Umm Suqeim Third. The largest completion was City Walk in Jumeirah.

"This takes the total stock to 3.39 million sq m of GLA. The appetite in the market on the supply side is positive, and over the next eight months, we are expecting further completions," noted Plumb.

"This includes projects such as the Dubai Mall – Phase Two which will add another 52,400 sq m GLA into the market," he added.-TradeArabia News Service