Jump in Dubai home sales a 'false start', says expert

The Dubai property market may be experiencing a “false start”, according to one real estate ­consultancy.

An increase in sales volumes in the first quarter and slowing price declines should not be misconstrued as evidence of a market recovery, said Phidar ­Advisory.

“The market is undergoing a false start now,” said the managing director Jesse Downs.

She said despite data that suggested an increase in transactions of about 10 per cent, a recovery is unlikely because rents are still falling, placing yields under pressure.

Gross yields for apartments dropped by 0.15 per cent to 7.6 per cent as rents declined by 2.5 per cent quarter-on-quarter, Phidar Advisory said.

And although apartment yields increased by 0.12 per cent to 4.8 per cent during the period, this was only because sale prices fell faster than rents – by 5.4 per cent and 2.9 per cent respectively.

“Sellers have become more realistic in the villa market and that has allowed for prices to adjust, as they should.

“That’s led to yield expansion, and we need to see more of that,” Ms Downs said.

She predicts that rents for both villas and apartments will continue to fall throughout 2017.

“Until we see a recovery in business and the jobs market, there seems to be little justification to call a recovery,” said Ms Downs.

“Oil prices are still low, the US dollar is still high and probably going to increase in strength.

“We expect one or two more interest rate hikes. It might not increase significantly but it’s most likely going to stay strong, and the cost of debt is increasing.”

One potential upside is increased investment from investors in India and Pakistan, Ms Downs said, as both currencies have recently strengthened against the US dollar and their domestic markets are expected to perform well.

A report by Chestertons Mena on Sunday said that the number of transactions completed in the first quarter of 2017 jumped by 25 per cent quarter-on-quarter. It said transactions on completed homes were up by 4 per cent but that off-plan deals surged by 45 per cent.

Ivana Gazivoda Vucinic, the company’s head of advisory and research, attributed the growth to “the increase in incentives and payment plans created by developers to make it more fin­ancially amenable for investors to purchase property”.

Chestertons Mena said 16,000 units were completed by developers last year and that a further 15,000 would come to market this year.

“With a growing population and ever-present foreign investors’ appetite, we expect the forecasted units due for delivery this year to be easily absorbed by additional demand.”

mfahy@thenational.ae

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