Friday / August 16.
HomeChannelsFeaturedDubai, Abu Dhabi real estate markets set for further declines: JLL

Dubai, Abu Dhabi real estate markets set for further declines: JLL

|By Arabian Post Staff|Oversupply concerns in the Dubai real estate market are increasing ahead of demand resulting in further downward pressure on both prices and rentals, JLL said in its review of 2018. The residential market in Dubai remains tenant friendly, allowing existing tenants to renegotiate their rents and providing attractive rentals and sales opportunities for new entrants to the market, it said.

Traditionally, the majority of expats have preferred renting over owning their home in Dubai, but this attitude is changing as a result of attractive payment plans from developers and the availability of longer term residency visas. Both sales prices and rents declined over the year, with the apartment sector recording average declines of around 11% in rents and 8% in sale prices. Similar declines were experienced in the villa market with sale prices and rents declining by 9% and 7% respectively in 2018. With supply expected to increase further, sale prices and rent will continue to face downward pressure in 2019.

Around 22,000 units were delivered during 2018, which is the highest for the last 5 years. Key projects delivered in Q4 2018 include the Hayat townhouses phase II in Townsquare and Mira Oasis Phase I townhouses in Reem bringing the total residential stock to 520,000 units at the end of 2018. This year also saw Majid Al Futtaim, which has been a key developer in the retail market, launch Tilal Al Ghaf, its first residential community in Dubai.

While more than 60,000 units are expected to be delivered in 2019, actual completions are likely to be far less (with the average materialization rate over the past 5 years being less than 50%).

Major projects scheduled for delivery in the next two years include Azizi Riviera in Meydan and Al Habtoor City. Supply is expected to reach 637,000 units by end of 2020, representing an average annual increase of 11%.

Similarly, the  Abu Dhabi marklet is also expected to remain oversupplied, which could dampen any potential improvement in prices and rental levels.  The residential market continued to soften, with further declines in both rents and sale prices recorded throughout 2018. With new supplies coming, the rentals are expected to further decline.

Around 5,000 new residential units were completed in Abu Dhabi in 2018. Q4 saw the delivery of approximately 1,600 units, bringing the total residential stock to approximately 257,000 units. Notable deliveries included Shams’ Al Qurm View and Sea Face Towers. Approximately 10,000 units are currently scheduled to enter the market by the end of 2019. The majority of expected supply is focused on Al Reem and Saadiyat Island, offering mid-high quality apartments. Over the past 3 years, an average of 35% of all expected supply was actually delivered as opposed to 2018, where 65% of the supply pipeline materialized.

Apartment rents declined by 5% (Q-o-Q) and 11% (Y-o-Y) respectively to reach approximately AED 120,300 per annum. Sales prices for prime villas and apartments registered annual declines of around 13% and 12% respectively, to reach approximately AED 10,500 per sq m for both apartments and villas.

As more supply is expected to materialize in the coming year, residential vacancies are anticipated to increase further causing further rental declines. The softening market conditions have forced vendors to decrease asking prices to attract the reduced level of demand. This has resulted in both homebuyers and tenants having more bargaining power when it comes to negotiating terms and conditions, rental rates, and sales prices.

Also published on Medium.