Apartment rental rates across Dubai, UAE, were down four per cent and the sales remained flat during the third quarter as new supply added pressure to the emirate's rental market, said leading real estate consultancy Asteco.

However the year-on-year (y-o-y) rental declines plunged 12 per cent and sales four per cent, stated Asteco in the Q3 Dubai Real Estate Report.

The report highlighted no movement in apartment sales prices q-on-q, the y-on-y figures however showed a more pronounced decline, averaging 4 per cent, with Business Bay and Dubai Marina both posting an 8 per cent drop, followed by Dubai Sports City, International City and Jumeirah Village, each recording a fall of 7 per cent.

Only The Greens and DIFC remained on par with the third quarter of 2016, stated the report.  

According to Asteco, the apartment rental rates over the quarter fell 4 per cent, while y-on-y rates showed a marked drop of 12 per cent. Dubai Marina posted the highest decline in rental rates at 19 per cent, compared to Q3 2016, followed by Downtown Dubai (18 per cent), Dubai Sports City (16 per cent) and Bur Dubai (16 per cent).

In the first three quarters of the year 10,200 apartments were delivered and a further 3,500 units are due for completion before the end of 2017. In 2016, the total supply was only 8,750 apartments, said teh expert in its report.

"There has been a steady rise in new projects reaching completion. However, Asteco believes a significant amount of the supply previously forecasted for handover in Q4 2017 will spill over into 2018," remarked John Stevens, the managing director of Asteco.

"These delays are likely to result from both intentional phasing considerations and unplanned construction delays/financial issues," he stated.

The report highlighted marginal changes across all property types in Q3, with sales in the office and apartment segments remaining flat, and in the villa segment showing a decrease of one per cent.

The figures are a minimal improvement on Q2 results, where price declines for apartments were 3 per cent and both for villas and offices 2 per cent.

“The Q3 results clearly showed a rise in transactions across the market, as owners and tenants continued to secure the best deal possible. However, while the market remained flat or witnessed marginal decreases, some areas did show more pronounced drops, particularly year on year,” observed Stevens.

"Similar patterns were recorded in the villa segment, with a nominal q-on-q sales price drop of 1 per cent and a decrease of 3 per cent y-o-y. Jumeirah Village posted the most significant decline y-on-y, at 9 per cent, followed by Dubai Sports City at 6 per cent," he added.

Villa rental rates echoed the apartment market, with 3 per cent q-on-q and 10 per cent y-on-y drops. The Springs showed the highest decline compared to Q3 2016, at 18 per cent. This was followed by Arabian Ranches and Palm Jumeirah (both 15 per cent) and Dubai Sports City and Jumeirah Village (both 14 per cent).

In reaction, rental rates for different unit types within the same community are now blurring, stated the Asteco report.

For example, within a rental rate range of Dh110,000 to Dh140,000 tenants can currently choose between a two-, three-, four- or five-bedroom townhouse in Jumeirah Village, stated the expert in the report.

The price disparity emerged despite supply in the villa market remaining consistently lower than that of the apartment market, with a total of 2,325 villas delivered in the first three quarters and an additional 1,300 units expected for completion in 2017. That compared to the 5,000 delivered in 2016, it said.
    
Stevens pointed out that the rise in new finance options for off-plan residential projects, including increased incentives and post-completion payment plans, has opened the market for buyers with more limited equity.

These developments now demand a larger share of the sales volumes compared to completed units, with rates continuing to decline as a result, he said.

"Compounding the issue, despite increased government spending on infrastructure, hospitality and retail in the run-up to the Expo 2020, is that market sentiment remains low. This is largely due to weak employment growth and the bearish outlook in terms of oil prices and global economic outlook," he added.

The most challenging asset class this year, according to the report, is the commercial market. Sales prices and rental rates remained flat in Q3, compared to Q2, with a y-on-y decline of 6 per cent for sales and a marginal 2 per cent for rentals, it stated.

While the overall trend is due to limited demand in an oversupplied market, the reluctance of landlords to lower rates in certain areas, is causing the market to flatten. Landlords need become more proactive and offer incentives to tenants to increase take-up, the report added.-TradeArabia News Service