Dubai, Abu Dhabi housing vacancy to peak in 2012

Housing markets in Dubai and Abu Dhabi are expected to see the average vacancy rise, before it peaks in 2012, while apartment sale prices and rentals continue to erode, property consultancy Landmark Advisory said on Wednesday.

The residential average vacancy will gradually increase to peak at 12 per cent in 2012 from 10 per cent in 2010, said Jesse Downs, the firm's director of research and advisory services.

"While all housing supply in Dubai is not a perfect substitute for Abu Dhabi housing demand, the current vacancy rates in areas preferred by Abu Dhabi commuters are within range of these estimates," Downs said.

Downs also expects Abu Dhabi companies to benefit through the availability of affordable and higher quality housing alternatives for staff in Dubai.

Apartment sale prices and rents in Dubai continued to erode, hurt by increasing supply, with average quarterly declines of 6.3 per cent and 5.8 per cent, respectively, the report said.

Increasing supply of residential properties in Dubai, existing limitations on the residency visas for property owners and limited mortgage activity have driven the residential sales volumes down 30 per cent sequentially, and pushed the rental volumes up about 25 per cent.

"The widespread expectation of additional price erosion keeps many investors on the sidelines waiting for opportunistic investments," Downs said.

Downs expects the average residential sale price to continue to decline into 2012, and the high quality properties with limited supply pipeline to remain relatively stable.

In Abu Dhabi, the actual transaction prices remained relatively unchanged amid low volume in the third quarter and villa transaction sale prices fell by six per cent, the report said.

Commercial office markets in Abu Dhabi and Dubai continue to face supply pipelines that will virtually double the existing supply in both cities, said Down.

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