Both tenants and property buyers in Dubai continued to enjoy bargaining power in recent months, but it won’t be too long before rents and house prices will once again pick up.
The latest analysis by a property listings site with more than 5 million monthly active users showed that between April and June, rents registered “mild” declines, while house prices started to level off.
Overall, rental values for one- and two-bedroom flats across the emirate fell by 2 per cent on average in the second quarter of the year compared to three months earlier.
Rental rates for bigger apartments, as well as sale prices for various properties, have not registered any significant changes, suggesting that the market is indeed heading towards the end of the cycle and bottoming out.
“Rental prices are now in the phase of bottoming out [however] tenants still have the upper hand with more negotiating power,” said Ann Boothelo, senior product marketing manager for property at dubizzle. Boothelo noted that, in the bid to attract tenants, landlords in Dubai are offering competitive prices and letting tenants pay with three- or four-cheques, to avoid having vacant properties.
The observation is consistent with the analysis of other property experts. Consultancy company ValuStrat said the market is showing signs of bottoming out, with the monthly growth rate of residential values staying “broadly stable” since July 2015. The firm forecast the market to start recovering during the second half of the year, although other analysts are expecting a little bit of delay due to the recent Brexit vote.
“The residential market is currently at a cyclical trough, having softened by about 15 per cent since its peak in mid-2014. Providing there are no major external shocks over the rest of the year, we expect the Dubai residential market to recover in early 2017,” said JLL in its report.
Other analysts argued that softening demand wil continue to put pressure on residential rents to decline further this year. According to Jesse Downs, managing director of Phidar Advisory, the rent correction will likely continue for another 12 to 18 months, adding that the market will stabilise only in the middle to late 2017.
The latest rental review covering 11 communities showed that as of the second quarter, there are areas that continue to offer cheaper rents for certain apartment types and these include Jumeirah Lakes Towers, Al Nahda, Bur Dubai, Palm Jumeirah, Jumeirah Beach Residence (JBR), Dubai Marina, International City and Jumeirah Village Circle.
In Bur Dubai rents for one-, two- and three-bedroom flats dropped by 2 per cent, 9 per cent and 3 per cent, respectively. In Al Nahda, three-bed apartments registered a 6 per cent decline.
When it comes to sale prices, figures remain generally unchanged, suggesting a levelling off of the market. There are certain developments, however, that continue to offer more affordable rates. In Jumeirah Village Circle, JBR and Al Barsha, sale prices per square foot dropped by 3 per cent. Properties within these areas are now selling at Dh867, Dh1,586 and Dh1,047 per square foot, respectively.
“Sale prices have decreased since mid-2014 back when they had reached their peak. The residential property sale price cycle is almost at a close as we have not witnessed any major shifts in pricing from [the first quarter to the second quarter of 2016],” said Boothelo.
In Abu Dhabi, property rental prices registered an overall average decline, with prices of one-, two- and three-bedroom apartments falling by 2 per cent, 1 per cent and 4 per cent, respectively compared to the first three months of the year.
Three-bed flats in Abu Dhabi Corniche and Sadiyaat Island experienced the biggest drop by 11 per cent and 15 per cent, with annual rental values at Dh160,000 and Dh220,000, respectively.