Apartment and villa rentals in Dubai, UAE fell an average of eight per cent year-on-year during the first quarter of 2017 as tenants remained budget-conscious, taking advantage of additional supply and competitive rates, a report said.

In contrast, sales prices in communities with good infrastructure, amenities and limited future supply potential recorded marginal increases, said the latest Q1 2017 Dubai market report from leading real estate consultancy Asteco.

 Villa sales prices in The Meadows and The Springs, for example, were up 8 per cent and 5 per cent respectively from Q1 2016

“From a sales perspective, apartments witnessed declines across the board. However, it was the upper-end of the market that felt the impact most acutely, with both Downtown Dubai and Dubai Marina seeing year-on-year decreases of seven per cent,” said John Stevens, managing director, Asteco.

“The villa sales market fared better as some of the established communities with good transport links and within proximity to DMCC and Media City, and those with good amenities including shops and restaurants, witnessed increased demand resulting in price growth,” he said.

Overall, Asteco’s research identified a one per cent quarter-on-quarter (q-on-q) decline in apartment sales prices in the first three months of the year. Since Q1 2016, the market recorded a drop of three per cent in rates.

“We have, however, noted increased transaction activity in Q1 2017 compared to the same period last year. Developers continued to launch off-plan properties at competitive prices and payment plans indicating healthy investor demand and further promoting movement within this sector,” added Stevens.

Apartments on Palm Jumeirah witnessed no change annually, whilst q-on-q sales declines of 3 per cent resulted in prices to drop to between Dh1,000 ($272) and Dh2,600 per sq ft In Jumeirah Lakes Towers sales prices increased by five per cent annually with no movement q-on-q to between Dh800 and Dh1,700 per sq ft.

In the affordable segment, Dubai Sports City witnessed an annual increase of 6 per cent and quarterly declines of two per cent - units were available from Dh700 to Dh1,100 per sq ft.

Villa sales prices recorded a q-on-q decline of one per cent, while annually the figures saw little movement. Arabian Ranches and Dubai Sports City noted a softening of four per cent annually to between Dh950 – Dh1,600 per sq ft and Dh850 – Dh1,150 per sq ft, respectively. This was attributed to an increase in supply in surrounding neighbourhoods providing greater opportunities at lower prices.

Apartment rental rates declined three per cent on average q-on-q and 8 per cent over the year. High-end properties were most affected with Palm Jumeirah witnessing price decreases of seven per cent q-on-q and 14 per cent annually. In DIFC there was no movement for quarterly prices, however, annually the figure dropped by 9 per cent. Mid-market apartments followed suit, witnessing quarterly and annual declines of three per cent and 12 per cent in Business Bay and two per cent and four per cent in Jumeirah Lakes Towers.

Discovery Gardens was the only area to notch an increase in the affordable sector with an annual rise of three per cent.

“A combination of new supply and tenants taking advantage of competitive rates has resulted in landlords offering more flexible terms either by increasing the number of cheques or, in some instances, offering rent free periods. This has been compounded by the addition of 3,600 apartments in Q1, which is expected to top 17,000 by the end of the year, thus putting further pressure on the rental market,” said Stevens.

In the villa rental market the trend was similar to apartments with declines of 3 per cent q-on-q and 8 per cent annually as tenants took advantage of increased availability of competitively priced properties.

Arabian Ranches recorded an annual decline of 14 per cent and a q-on-q drop of 9 per cent with a three-bedroom available from Dh125,000 to Dh200,000. In Jumeirah, an annual decrease of 15 per cent and a seven per cent q-on-q drop, resulted in rents for a three-bedroom to range from Dh150,000 to Dh230,000. The Lakes saw very little price movement with a nominal decline of one per cent q-on-q and rents for a three-bedroom ranging from Dh170,000 to Dh250,000.

Rental rates are expected to decline further as 4,000 villas are scheduled to be delivered by the end of the year, which are likely to be leased below prevailing rates to improve take-up.

“Sales prices in many communities are fluctuating and are not expected to stabilise until rental rates bottom out, which is not expected to happen until later this year or early 2018,” added Stevens.

In the commercial sector, rents and sales both fell by two per cent over the quarter. The bulk of business enquiries and transactions were for smaller sized units. However, with current oversupply (further delivery of 2.7 million sq ft is expected by the end of 2017), increased pressure has been placed on annual sales and rentals resulting in rates to soften by three per cent and six per cent respectively. – TradeArabia News Service