Dubai's real estate market is under pressure due to a continued decline in villa and apartment rental rates and sales prices during the second quarter, according to Asteco, a leading property services company in the UAE.

The rents are likely to slide further with anticipated handovers of key projects across the emirate, said the real estate expert in its Dubai Real Estate Report Q2 2018.

The quarterly report also highlights the current and anticipated handovers of key projects across the emirate.

Villa and apartment sales prices fell by four per cent over the quarter, with an annual drop of 11 per cent. The decline in apartment sales was most prominent in Dubai International Financial Centre (DIFC), Discovery Gardens and Dubai Sports City that registered a six per cent fall since the first quarter of 2018.

Meanwhile, the highest quarterly drops in villa sales prices were observed in Jumeirah Park (eight per cent), Arabian Ranches (five per cent) and The Springs (five per cent), stated Asteco in its report.

Sales activity remained steady, despite an overall bearish outlook from investors and end users. The stable trend is mainly attributed to further project launches, often with increasingly attractive incentives, competitive rates and extended payment terms.

The second quarter saw the launch of several new residential developments, including Amaranta 3 and Tilal Al Ghaf Phase 1 in Dubailand, as well as Zawaya – a mixed-use community in Motor City, and Belgravia Heights I & II in Jumeirah Village Circle (JVC).

John Stevens, the managing director of Asteco, said: "Generally, new developments focused on the affordable segment, resulting in a marginally more noticeable quarterly drop in sales prices at five per cent, compared to three per cent for mid- and high-end properties."

"Despite a lower number of anticipated handovers, the volume of new supply remained significant," he stated.

"This contributed to an overall quarterly decrease in apartment and villa rental rates of three per cent and two per cent, while annual declines were more prominent at 12 per cent and 10 per cent respectively," he added.

According to Stevens, the vacancy levels across multiple projects rose due to the supply of additional inventory.

"Properties with proactive management and maintenance teams succeeded in maintaining steady occupancy rates, while landlords offering discounts and additional incentives also achieved solid tenant retention. Over the next quarter, we expect further gradual but consistent softening in rental rates for all asset classes," he noted.

Compared to 2017, the highest apartment rental rate drops were recorded in Jumeirah Village (16 per cent), followed by Jumeirah Beach Residence (JBR) with 15 per cent, and Jumeirah Lakes Towers, Deira and Discovery Gardens with 14 per cent each, he stated.

"As for villa rental rates, Jumeirah Park and Jumeirah Village showed the most pronounced annual decrease at 15 per cent, followed by Arabian Ranches with 11 per cent," observed Stevens.

Approximately 3,400 residential units were handed over in Q2 2018, closely matching the first quarter with the majority of new supply located along the new growth corridors of Sheikh Mohammed Bin Zayed Road (E311) and Emirates Road (E611), said Asteco in the report.

An estimated total of 25,000 additional units is slated for delivery by end-2018, it added.

Asteco has revised its 2018 supply projections for both residential units and office space downwards by 17 per cent and 20 per cent respectively, based on a combination of factors including lower handover volumes in the first half of the year and anticipated project delays.

Completed office inventory rose significantly compared to the first quarter, with the addition of more than 760,000 sq ft across two developments - the 320,000 sq ft HSBC headquarters in Downtown Dubai and the 440,000-sq-ft third building of the One Central project in the Trade Centre area.

On the overall outlook, Stevens said: "Proactive government initiatives and ongoing infrastructure development are expected to boost market sentiment and drive investment in the UAE."

"The latest positive announcements include the freezing of school fees for the academic year 2018-2019, as well as the introduction of a 10-year residency visa for investors and specialists, and 100 per cent foreign ownership of companies outside free zones," he stated.

"The UAE has always been a real estate investment haven, and the new laws will attract an untapped pool of international investors seeking a tolerant country with deep-rooted values to call home," he added.-TradeArabia News Service