An expected overall residential market recovery is being slowed by off plan activity, according to a Q3 real estate review published by ValuStrat.
The ValuStrat Price Index notes that while the recovery process is under way in more than half of the locations it monitors – with prime areas such as Downtown Dubai and Emirates Hills witnessing capital gains for the first time since 2014 – off plan transaction numbers were higher than ready property sales due to strong buyer demand for new homes.
“The new homes market has seen increased activity, with many developers working to diversify away from the high-end luxury segment that Dubai is well known for, broadening into a burgeoning affordable homes sector and new locations to the south and east of the city,” said Declan King, Managing Director and Group Head Real Estate of MRICS.
According to ValuStrat, 73 percent of all residential sales transactions in Q3 were off-plan, particularly in Downtown Dubai (88 percent), Business Bay (83 percent), Dubai Silicon Oasis (82 percent) and Jumeirah Village (78 percent).
The total new supply of residential stock this year is estimate at 25,000 units, half of which – most of them in Dubailand, International City and Dubai Silicon Oasis – have already been completed. With many delayed projects from the last 18 months now completed or soon to be delivered, the estimated residential supply for 2018 is estimated to be 55,000 units.
The price index, which tracks 16 apartment and 10 villa and townhouse locations in Dubai, shows a 1.2 percent annual decline in values, the equivalent of average capital values being 14.6 percent than they were at their peak in 2014.
Haider Tuaima, Head of Real Estate Research at ValuStrat, noted that locations with prices that appreciated more than 5 percent over the last year include Downtown Dubai excluding Burj Khalifa (8.1 percent), Discovery Gardens (7.7 percent) and Business Bay (6.7 percent).
He added that locations that saw price declines of 5 percent or more include Al Furjan townhouses (-6.6 percent), Dubai Marina (-5.5 percent) and Jumeirah Lake Towers (-9.1 percent).
Additionally, residential investment yields compressed by four basis points since the beginning of 2017, as market rents for H1 2017 were 10.5 percent lower than the previous year. The highest point yields were registered in Discovery Gardens (6.03 percent), Dubai Sports City (5.93 percent) and Remraam (5.69 percent).
ValuStrat’s Office VPI found that average capital values for offices are 6.5 percent lower than the same period during 201, 3 percent higher than the same period last year, and percent lower than the previous quarter. The highest annual increase – 13.3 percent - was recorded in Jumeirah Lake Towers, while prices in Business Bay fell 10.9 percent year-on-ear.