Apartment sales in Dubai during the second quarter of 2015 were marked by a shift towards more affordable properties, says a new report by Asteco.
Locations such as IMPZ, Dubai Silicon Oasis, International City, and the recently handed over Queue Point and Sky Courts developments in Dubailand witnessed sustained demand in Q2 as yields for studio and one-bedroom apartments in particular, remained attractive, the report notes.
Affordability was also a priority for villa investors with Jumeirah Village recording a high number of transactions for some of the townhouse properties by Nakheel and in Indigo Ville, priced at Dh700,000 up to Dh1.2 million.
In comparison, larger properties, including five and six-bedroom villas, saw minimal transactions completing in communities such as The Villa or Dubai Sports City, despite strong rental demand, the report said.
“However, despite strong transaction levels, the increasingly competitive market environment, with a lot of new supply, means that the two per cent quarter-on-quarter decline is not going to be a temporary blip, with more pressure on owners to review their selling price, still to come,” John Stevens, Managing Director, Asteco.
Off-plan properties at negative premiums
Asteco also noted an emerging trend by a limited number of purchasers, who were advertising off-plan properties, not yet in the construction phase, at negative premiums, in an attempt to relinquish financial obligations.
This quarter, it was the office sector that saw the most gains, with an average two per cent growth in rental rates, dependent on area, although average sales prices declined by one per cent.
Leasing-wise, DIFC witnessed an 11 per cent quarter-on-quarter growth with existing stock almost fully occupied and companies eyeing expansion forced to seek space in nearby buildings, which has benefited development such as Central Park Towers, which attained rates of Dh180 and Dh250 per square foot for shell and core and fitted space respectively.
Index Tower’s leasing rates also increased up to Dh350 per square foot, as full floors were subdivided to offer small, fitted space to companies looking to set up at the DIFC free zone.
However, previous star performer Business Bay saw a 10 per cent quarter-on-quarter decline in leasing prices, affected by the handover of a substantial amount of office space, with Asteco predicting more pain to follow with a further 1.3 million square feet of new supply to be delivered in the next few years.
“The office sales market has essentially moved away from investment buyers to one where end-users are the most common buyers for completed buildings.
“In the future we expect sales prices to come under pressure in areas where significant supply is due to be handed over,” said Stevens.