There has been little change in the residential sector of Dubai in the first quarter of the year, indicating that the market is at the very bottom of a years-long decline, revealed the first quarter report by the world's leading real estate investment and advisory firm Jones Lang LaSalle MENA (JLL MENA).
The report mentions that apartment prices saw no change at all and villas recorded only a 1 per cent decline from the previous three months. Year after year, apartment prices have ticked up 1.1 per cent , while villas saw a 0.6 per cent increase, according to JLL. Likewise, rents ticked down negligibly from in the first quarter.
“This suggests that the residential sector is currently poised close to the bottom of its cycle,” JLL wrote in the report released last week “The key question concerns the timing of any recovery.”
It also predicted that residential prices will keep this trend till 2017 saying, “Given the continued slowdown in the Dubai economy, and its dependence upon the global economy where growth remains uncertain, any recovery in residential prices in Dubai is unlikely before late 2017 at the earliest.”
However, the report was silent on the luxury sector.
While mentioning the supply, the report says, “Around 2,600 units came onto the market in the first quarter of 2017, most of them in the posh Akoya neighborhood, where there’s a number of development projects in the works. Sixty percent of the new residential units were apartments, about a quarter were villas and the rest were townhouses, according to JLL.
The firm anticipates that only half of the 28,000 units slated for delivery this year will actually come to fruition on time, in line with previous years’ completion rates. Key projects in the pipeline include two planned communities by developer Emaar, Dubai Hills Estate and Arabian Ranches 2, as well as Burj Vista, two luxury apartment buildings in downtown.
The report also discusses the impact of the new Emirates NBD Real Estate Investment Trust (REIT) being listed on the Nasdaq Dubai exchange in Q1. Emirates NBD is Dubai's largest lender, and the launch of its REIT will aim to improve liquidity and enhance flexibility in the market. The report states other REITs are expected to follow this trend over time and with such positive ventures, investors will continue to show interest in a broader portfolio of properties.
Craig Plumb, head of JLL MENA, says “While we recognise that the MENA region is perhaps not directly at the forefront of revolutionizing the workplace, the young, dynamic, innovative nature of the region, especially Dubai, means its real estate markets are likely to implement and adjust to these changes rapidly over the next 20 years.”
He added, “With Dubai's real estate market showing signs of maturity and the subsequent REIT's entering the market, changes are already taking place in other sectors of real estate.”
“The residential market remains a favourite destination of investment among Indian investors and according to recent data released by Dubai Land Department (DLD), there has been AED 12 billion (USD 3.3 billion) worth of property transactions that have incurred among investors from India. Although the residential market continues to slow down, this figure highlights the potential the sector has in terms of growth in the future,” he stated.