Nearly 2,200 units were added to the Dubai residential market in the first quarter 2016 alone with rents dipping during the period compared to fourth quarter 2015, according to property consultancy JLL.
The first quarter 2016 report reveals that rents for apartments were down by three per cent quarter-on-quarter for apartments and one per cent for villas. On the year-on-year (y-o-y) basis, the decline has been five per cent for both the categories.
On the price front, the report states the residential market is approaching the “bottom of its cycle,” stating Reidin sales index dropped 10 per cent y-o-y, while the general rental index declined at a slower rate of 5 per cent. Annual price was 10 per cent for apartments and 11 per cent for villas.
With the 2,200 new houses, total stock of housing units (apartments, villas and town houses) has reached 458,500 units.
Craig Plumb, Head of Research at JLL Mena, said: “Various factors are bringing the market towards the bottom of its cycle. On one hand, the strong dollar is impacting the USD pegged GCC currencies which is making Dubai real estate more expensive for buyers from non-USD pegged markets. On the other hand, the continued period of low oil prices is tightening regional liquidity which is also affecting the real estate market.”
Market ‘bottoming out’
In March 2016, Emirates 24|7 first reported that the residential rental market was on the way to “bottom out.”
“It is very hard to talk about but sometime towards the end of this year or early 2017 is when we think residential market will bottom out,” Plumb had said.
Average residential rents across the emirate fell by 5 per cent in 2015.Residents, however, complain that rents have increased as their landlords are seeking increases far higher than the official rent index.
Though JLL predicts 26,000 new units to be delivered this year, it believes only 10,000 to 12,000 units to be completed. Their assumption is based on the materialisation rate in the UAE which is between 30 per cent and 50 per cent of the dwellings proposed by developers actually materialising.