Boom and bust – two words that are regularly heard when the property market in the United Arab Emirates, especially Dubai, is discussed.
But that theme appears to be changing. At least that’s what some industry experts are indicating.
The property market, after rebounding sharply since early 2013 from the global financial crisis-induced crash, is now showing signs of stabilising – with the pace of growth in residential rents and values slowing in Dubai, Abu Dhabi and Sharjah, says property consultancy Cluttons.
No bust then, just a gradual cooling of the market for now.
“The impact of this slowdown on overall economic growth is still too early to assess, but with other segments of the economy still gaining strength, any loss in the total contribution by real estate is likely to be offset by other resilient and fast growing non-oil sectors; such as financial and business services, manufacturing, retail, trade, tourism and hospitality,” Cluttons says.
Here are some key takeaways from Cluttons’ annual U.A.E. property report.
DUBAI:
- Dubai Residential Market Performance – Capital Value Growth.
- Cluttons
-After the extraordinary 51% rise in house prices across Dubai’s freehold areas last year, the market’s ability to sustain such tremendous growth was always at high risk of petering out.
-House prices expanded just 0.6% during 2Q, down from the 3.1% achieved during the first quarter.
-Despite the near flat growth, values still stand 18.5% higher than this time last year, but this masks the fact that the total rise in house prices during 1H was just 3.8%.
-Villa values fell by 1.6% during 2Q – the first decline since 1Q 2011, while apartments experienced price gains of 2.3% in the three months to June.
-The mortgage cap has begun to have the desired impact. Data from the land department show that total number of transactions during the January-June period stood 12% lower than the same period last year.
-Villas have been particularly hard hit – the number of villa deals in the first six months was down 48% on year.
-The slow, but steady, normalisation of growth, which commenced late last year, is expected to persist for the remainder of 2014, while buyers adjust to both the price containment measures implemented by the government and the new price benchmarks reached across the city.
ABU DHABI:
- Abu Dhabi Residential Market Performance – Capital Value Growth.
- Cluttons
– During the second quarter, Abu Dhabi’s freehold market recorded an 11.4% rise in capital values, leaving them 48% above the same time last year.
– The latest rise translates into a 19% increase in average house prices during the first six months of the year.
-Villas retained their edge over apartments, with prices rising by 15.1% during 2Q; this compares to 8.4% for apartments over the same period.
-The removal of Abu Dhabi’s rent cap has no doubt fuelled buyer demand from households looking to accelerate a move into owner occupation, driven by fears of further substantive hikes in the rental market.
-Current conditions suggest that the market is still capable of delivering further price rises. However the magnitude of increases is likely to temper over the remainder of the year, particularly as growth in the Dubai residential market continues to slow sharply in response to local and federal market regulation.
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(via WSJ Blogs)
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