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• Average rental increases of 7% for apartments, 4% for villas and 12% offices during 2014
• Year-on-year apartment and villa sales prices up 4% & 1% respectively
• The supply of 13,000 new homes in 2015 to soften market further says latest Asteco report
Asteco, the Middle East's largest independent full service real estate company, has released its 'Dubai Property Review 2014 Highlights & 2015 Outlook', underscoring a predicted softening of sales activity in apartments and villas for 2015 due to upcoming supply following declining sales and rental return in H2 2014.
Rental rates rose across all three properties types with apartments showing average year-on-year growth of 7%, 4% for villas and 12% for offices. The impact of tenants choosing to remain in existing accommodation rather than relocate resulted in a slowdown in activity.
The citywide annual average for a two-bedroom apartment in Dubai was AED 122,000 at the end of the year, with an average 6% year-on-year rental rate increase recorded in Q4 2014.
"A further 12,000 apartments will be added to the city's existing inventory in 2015 as well as over 2,000 villas. This is good news for tenants across the emirate, and a more tempered rental environment is especially welcome when you consider that since 2011 apartment rents have increased by 65%, and villas by 55%," said John Stevens, Managing Director, Asteco.
Villa rental rates are anticipated to remain relatively stable in the most desirable areas, with the report flagging marginal declines in less desirable areas.
"Looking beyond this year, a more significant drop in rental rates could be on the cards from 2016 onwards as the large number of projects announced in 2013/14 (an estimated 12,000 to 14,000 villa units) are completed," said Stevens.
Apartment rents increased by 65% since 2011 but are still 25% lower than in 2008. Rental rates are 7% higher, on average compared to last year. Villa rates increased by approximately 55% since their lowest in 2011, with Q4 2014 rates still 20% lower than in Q4 2008 but up 4% since last year.
The report also marked 2014 as a year of stabilisation with sales price increases of 4%, 1% and 9% respectively for apartments, villas and offices. In a year of two halves, Dubai's residential sales market recorded moderate growth in the first half of the year, with significant slowdown in market activity and sales transactions in H2 2014.
Villa sales prices were stable in the final quarter of 2014 compared with Q4 2013, although they fluctuated over the year, with the Meadows, Springs and Arabian Ranches communities accounting for 50% of all villa sales. The Palm Jumeirah was the only development to experience an increase in Q4 2008 prices, up 4% underscoring the popularity of the Palm with both local and international buyers.
"We anticipate that the overall sales prices of units in sought-after communities are likely to see relative stability, while secondary communities, with limited facilities and amenities will be faced with declining values," said Stevens.
Underscoring reduced risk appetite, new lending regulations and fees making the purchase process more expensive, the market saw a 25% reduction in villa and apartment transactions in 2014 against 2013 figures (source: Reidin). Indeed, transactions levels fell by 40% year-on-year in Q4 2014 alone. Off plan sales also slowed with the added burden of newly completed products offering buyers an increasing choice of investment opportunities.
"Villas in the Umm Suqeim and Jumeirah areas were in high demand last year, but these were predominantly older or large properties with high running costs, with expatriate families suffering from a shortfall in smaller new villas. Therefore the release of over 2,000 new villas this year will be well received," Stevens noted.
Sales prices for apartments ended 2014 showing a 7% increase compared with Q4 2013, but with additional supply on the way and ongoing macro-economic challenges significant market growth is unlikely. Dubai Marina and JBR together with international City, Downtown Dubai and Jumeirah Lake Towers witnessed the most sales transactions in 2014.
On average, apartment sales prices Q4 2014 were 22% lower than in Q4 2008, but still 6% higher than Q4 2013, despite having declined in the second half of 2014. Villa prices were 30% lower than in Q4 2008. Indeed, at that time, the strong levels of demand together with the lack of completed villa communities, led to extremely high prices, with Arabian Ranches trading at AED 2,200 per square foot, in comparison with AED 1,150 per square foot in Q4 2014, on average.
With current sales rates stabilising and rents witnessing potential increases in the medium term, office yields are expected to improve in 2015.
The lack of single-owned, good quality office properties is set to continue this year with only two major projects The One JLT by DMCC and C1 Tower at Dubai World Trade Centre, anticipated for handover at the end of 2015.
"The office market has lagged behind the residential market by a full 12 months, with rental rates lows in 2012 and slow growth from then, at 35% on average from 2012 through to 2014 and sales prices increasing by 13% over the last year only," commented Stevens.
For more details, please visit www.asteco.com
A copy of the full Asteco UAE Property Review 2014 Highlights & 2015 Outlook report can be downloaded from -
http://www.asteco.com/valuation-advisory/report-library/?city=dubai
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About Asteco
Asteco, a major regional and international real estate services firm and the largest property services company in the United Arab Emirates, was founded in Dubai in 1985. Asteco offers independent market analysis, design development consultancy and valuation services, sales and leasing services, as well as asset and property management services.
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Media contact
Nathalie Viselé
Director
Shamal Marketing Communications
Dubai, United Arab Emirates
Tel: +9714 365 2711
Mobile: +971 50 345 7982
E-mail: nathalie@smc-pr.com
© Press Release 2015
