Ready-to-move-in units have seen a surge in popularity in Dubai owing to attractive incentives and long-term payment plans from developers looking to clear their inventory.
In the fourth quarter of 2018, completed properties in Dubai saw a 22 per cent increase in transaction volumes over Q3 and an overall 7 per cent uplift across 2018, according to real estate services firm Chestertons.
"The real estate market recovery in Dubai continues to be hampered by the increasing excess supply being released to the market. However, our research has highlighted 41 per cent of all residential transactions now relate to completed units, up 6 per cent from 2017, indicating a shift in buyers' interests, with the trend set to gain further momentum in 2019 as developers offer attractive incentives and long-term payment plans," said Ivana Gazivoda Vucinic, head of consulting, Chestertons Mena.
Apartment sales prices fell by 5 per cent from the previous quarter while average villa prices softened by 3 per cent. Furthermore, year-on-year performance showed that apartment prices declined by 16 per cent and villas by 13 per cent, according to Chestertons
According to Knight Frank, residential prices and rents in the UAE are likely to continue to soften in 2019. "However, we may see additional demand which helps underpin the market as a result of the recent approval of a range of legislations to ease visa regulations, given that many of the changes are linked to property ownership," said Taimur Khan, research manager, Knight Frank.
"While there are clear challenges facing the market, the recent approval of a range of legislations to ease visa and foreign business ownership by the UAE Cabinet are likely to drive additional demand in the UAE's property market. Looking ahead, we expect that the prime segments of the market are likely to continue to outperform the mainstream market overall," Khan added.
In the apartment segment, prices in Dubai Sports City, International City and Jumeirah Village Circle (JVC) all fell by 9 per cent compared to the previous quarter. Downtown Dubai and The Greens fell by 8 per cent and 7 per cent respectively. In contrast, Dubai Marina remained one of the most resilient locations, witnessing a decline of just 1 per cent. Annually, it was Discovery Gardens which saw the steepest decline, with prices dropping by 25 per cent year on year. The most resilient apartment location was Dubailand with just a 5 per cent adjustment from the previous year.
In the villa sales market, Palm Jumeirah observed a 7 per cent decline in Q4. The Meadows and Springs remained unchanged from the previous quarter while Arabian Ranches fell by just 1 per cent, indicating the prices in these particular communities may have bottomed out, the Chestertons report added.
In the rental market, apartments saw a further 4 per cent decrease in Q4 and a 3 per cent drop for villas from Q3. This was a continuation of a trend which saw an overall 12 per cent annual decline in apartment rents and 8 per cent for villas.
In the rental market, apartments in Dubai Marina, Dubai Silicon Oasis, Dubai Sports City, Dubailand and International City witnessed a 5 per cent decline in Q4, with a one-bedroom in Dubai Marina now available for Dh82,500. Downtown Dubai, JLT, JVC and Dubai Motor City all declined by 4 per cent from the previous quarter.
Due to the increasing stock of smaller format and studio apartments, these units appear to be most affected by market adjustments with a year-on-year recorded drop of 16 per cent for studios and 12 per cent for one-bedroom units.
In the villa rental market, the highest Q-on-Q declines were witnessed in three-bedroom units with average rental declines of 4 per cent.
"From a rental perspective, Dubai continues to be a tenant-friendly market, with many making significant savings by renegotiating terms and price with current landlords or moving to a cheaper location within their current district or relocating to a new community," added Vucinic.
The addition of new stock and limited new demand continues to place pressure on landlords with many of them competing on several fronts to retain or attract new tenants with multiple cheques, rent-free periods and in some cases agency fees being covered.
According to Vucinic, this could result in landlords taking advantage of the holiday let market, which has been legal in Dubai since 2016. "With demand for annual contracts weakening and rents continuing to fall, short-term holiday rental could prove very lucrative, especially in popular locations, particularly as we edge ever closer to Expo 2020," she said.
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