Residential prices in Dubai, UAE, continued to drop in the third quarter (Q3) of the year amid projections of further declines, a report said.

Apartment lease rates declined 3.4 per cent, while sale prices declined 4.1 per cent, pushing gross yields up to 7.9 per cent, a three-month gain of five basis points, according to the research note “Phidar House Price Index: Dubai 9/5@ released by Phidar Advisory, an advisory firm specializing in real estate in the UAE.

“Slow demand growth remains the immediate barrier for price recovery,” said Jesse Downs, managing director of Phidar Advisory.

“Weak demand combined with moderate supply growth will lead to further rent and price atrophy, likely into and possibly through 2017,” she added.

 Lease rates for Single Family Homes (SFH), also referred to as villas, decreased 1.8 per cent and sale prices declined 4.8 per cent, which pushed yields up to 4.9 per cent, a gain of 15 basis points in Q3.

“There is a mismatch between the supply being delivered and new demand,” said Downs.

“Indicators suggest companies are hiring for junior and mid-level positions, but much of the new supply handed over in the second half of 2016 is positioned for mid-high to high income households,” she added.

In Q3, Phidar’s Dubai Real Estate Investment Demand Index REIDI decreased by 8.9 per cent QOQ and declined 9.1 per cent since 2015, driven primarily by exchange rate fluctuations. In the first nine months of 2016, the US dollar – and therefore UAE Dirham – strengthened against 11 of the 14 floating currencies included in the REIDI. The remaining three floating currencies increased against the dollar: AUD (+0.9 per cent), EUR (+0.6 per cent), and SGD (+1.6 per cent).

The Great Britain Pound had the most notable impact on the REIDI, a combination of the significant decline in the GBP and the historically high proportion of British investors into Dubai property. The GBP experienced the most significant decline (-14.1 per cent), since 2015.

The majority of value was lost in the past quarter (-8.8 per cent) after the United Kingdom’s referendum to leave the European Union, also called Brexit, passed on June 23.

“Strong US Dollar, low oil prices and weak occupier demand remain a barrier to recovery in 2016. In 2017, the biggest challenge may become supply and we do not expect stabilization until the second half of 2017,” concluded Downs. – TradeArabia News Service