20,000 residential units by year-end

Dubai will see the completion of 20,000 new units by 2011-end, as rents in low to mid-end apartments are more likely to witness further declines, Jones Lang LaSalle (JLL) said on Monday.

“Approximately 7,900 units were completed in first quarter, bringing the total current residential stock to 317,200 units. A further 20,000 units are expected to be completed by end 2011, bringing the total residential stock to approximately 338,000,” the global real estate consultancy said in its first quarter report on the Dubai property market.

Apartments will constitute 79 per cent of total residential stock by the end of 2011.

In an interview with an Arabic newspaper, Sultan Butti bin Mijrin, Director-General of Dubai Land Department had said that about 10,000 new houses would enter the property market this year.

“…But this would not put any pressure on the local property market,” he said.

JLL believes that with Nakheel recommencing work on some of its stalled projects and the first project financing under Real Estate Regulatory Agency’s Tayseer programme being announced, future supply figures for 2012 and beyond could be increased.

“There are currently another 114 projects in this scheme. This trend could however be offset if RERA cancels some of the 90,000 units that it is currently reviewing the construction status of,” the report said.

In March, Majida Ali Rashed, Senior Counsel Strategy, DLD told Emirates24|7 that property buyers can also benefit from Tayseer, as the programme is now enrolling banks that offer end-user financing for the approved projects. The list of the accredited projects has still not been released.

Despite no reliable data available for transaction levels in Dubai’s residential market, JLL expects general easing of lending conditions and price stabilising in some areas will aid in increasing transaction volumes in 2011.

Dubai registered land transactions worth Dh120 billion in 2010 with the DLD director-general saying last month that he expects “the market to perform better than the last year.”

On the rental front, JLL expects low to mid-end apartment rents to decrease during the year with the quarter-on-quarter(Q-o-Q) decline of two per cent and year-on-year (Y-o-Y) fall of five per cent.

“Over the first quarter, rents in International City and the lower end apartments within Dubai Marina continued to drop at a higher rate than the higher-end apartments in Burj Khalifa Downtown and Palm Jumeirah,” the report said.

Rents, however, in mid to high-end villa rents will remain stable with q-o-q decline of two per cent, slightly more than the fourth quarter 2010 as landlords adjusted rents to compete with lower apartments rents. Y-o-Y decrease was of 12 per cent.

Rents in high-end villas on Palm Jumeirah remained relatively stable, while rents in The Springs and Arabian Ranches declined in the first quarter.

“This trend is expected to continue over the remainder of 2011 as more mid-range villas will be handed over in the Jumeirah Village and Jumeirah Park areas.

Landlords in this segment are also more inclined to lower rents to keep their property tenanted to help pay for their mortgage obligations,” the report said.

Average asking prices for apartments remained fairly stable atDh980 per square feet during the first quarter, while the average achieved prices decreased by seven per cent to aroundDh773 per square feet.

The average achieved price for villas fell six per cent over the first quarter to Dh833per square feet, while asking prices remained unchanged.

Office space

In the office sector, 4.6 million square feet was completed in the first quarter, taking the total stock to 60.2 million square feet. New additions were mostly recorded in Business Bay, Jumeirah Lakes Towers, Tecom C and the Dubai International Financial Centre.

According to JLL, the current estimate for completions in 2011 is approximately14 million square feet. However, it warns that actual deliveries might be lower as developers continue to face tight cash flow and the current oversupply situation worsens.

Despite surge in office space, average prime rents in the CBD (excluding DIFC)remaining unchanged in the first quarter 2011 at Dh150 per square foot. The market saw a decline of 21 per cent in the fourth quarter 2010.

Vacancy rates continued to rise, with citywide vacancies at44 per cent and vacancies in single ownership CBD properties rising to 27 per cent.

“The social unrest in other parts of the MENA region has led to increased enquiries for space in Dubai, but this has not translated to any specific leasing activity in the first quarter. In the medium term, the Dubai market could benefit from firm relocating from Cairo, Bahrain and other more volatile markets because of its relatively safe and stable market,” JLL said.

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