Dubai apartment rental growth seen as ‘sluggish’ during Q1
Most rents across Dubai's apartments remained stable during the fourth quarter of 2015, according to a new report by real estate firm Chestertons.
Its MENA Observer report said rentals in the majority prime areas in Dubai didn't witness any change during Q4 while saying the property market is expected to remain "sluggish" during the first three months of this year.
However, it added that locations such as Jumeirah Park, Islands and Golf Estates observed decreases of 3 percent, 2 percent and 2 percent respectively.
Chestertons said villas also saw a decrease of 1 percent in rental price in Q4 last year as compared to the previous quarter.
Declan McNaughton, managing director, Chestertons UAE, said: "The residential prices dropped in the last quarter and that has made the yields attractive. Apartments provided higher average yield than villas. International City and Discovery Gardens were the highest yield providers in apartments.
"Villa segment provided a 5 percent yield as the market witnessed a decline in both the rental and sales prices. Mudon, The Springs and Victory Heights were a cut above the average yiel.
However, we expect the market to remain sluggish during the first quarter of 2016 due to a combination of factors including lower oil prices, dollar appreciation and regional economic uncertainties," he said.
According to Chestertons, the Springs and Meadows were the top traded destinations with transactions worth over AED940 million. Apartments sector accounted for 64 percent of the transactions in Q4.
Mortgages during the same period had dropped by 43 percent indicating the fact that the end users demand for residential properties is slowing down, its report added.
McNaughton added: "Property prices have corrected significantly over the last year with attractive bargains in some locations. With high rentals, this is an apt time to lock a property that will bring good yields. There is a general consensus in the industry that the market will remain subdued during 2016.
"However, this phase could provide good investment opportunities for the long-term.
Also thisphase will not stay there for long as we move closer to EXPO 2020. This is an ideal market for both end-users and long term property investors," he said.
Chestertons said the Dubai market is expected to add about 3,000 more units during the courseof 2016. However, imbalance in the supply and demand situation will continue to build pressure on property prices across the emirate.
"We expect the sale prices to correct further during the year," Robin Teh, country manager, Chestertons UAE.
"In 2015, an estimated 15,000 units were delivered in Dubai. We are likely to see a similar number being delivered over the next three years, following which supply may reduce significantly. Master developers could alter the construction and delivery cycle accordingly and this could keep the supply figures under control," he added.