Recovery in Dubai property market not expected until late 2017, says Cluttons
Prices in Dubai’s residential market continued to fall during the third quarter of 2016, dropping by a further 2.6 per cent, according to a new report by Cluttons.
The firm’s Winter 2016/17 Property Market Outlook said residential prices reman 7.4 per cent lower year-on-year, and are 26.7 per cent below the previous market peak in 2008. It argued that residential property values are not expected to stabilise until late 2017 once employment picks up as a result of more infrastructure work being undertaken ahead of the Expo 2020 event, but also sounded a cautionary note on supply levels.
The head of Cluttons Dubai, Murray Strang, said that it is “closely monitoring the level of residential supply coming to the market”.
“With 34,000 units announced this year, it’s clear that project announcements are continuing at an unrestrained pace, despite what could be perceived to be challenging trading conditions.”
He said that if supply continues to increase over the next 12-18 months and the global economy remains unstable, it is “likely to cause the current stability and projected bottoming out of the real estate market to unravel, with further price falls likely to follow suit”.
“Demand and supply are almost in-sync currently, but this delicate balance can quickly be upset by a supply surge,” Mr Strang said.
Rents also continued to fall, but at a slower pace than in the second quarter of the year.
Third-quarter rents in freehold areas dropped by 1.5 per cent, compared with 4.4 per cent during the second quarter of the year. Average rents are 8 per cent lower than in the same period last year.
The firm said that rents in Dubai’s office market remain largely unchanged, with the sector showing “a far greater degree of resilience” than other commercial office markets in the region.
Cluttons said consolidation in both banking and finance and the energy sector are showing signs of winding down, and that there is still demand from other regional groups including the legal, pharmaceutical and technology sectors.
Faisal Durrani, the head of research at Cluttons, said that was due to the faith in Dubai’s economy being shown by international companies.
“This is reflected in the fact that occupiers such as Huawei and MasterCard are pressing ahead with purpose built schemes in sought-after office hotspots such as Dubai Internet City.”
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