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September 2017

European Central Bank and Bank of England tell same old story

Published: Thursday 28 December 2017

By Adrian Bishop

Annual property prices fell across the board in Dubai and Abu Dhabi, the latest figures show.

Values dropped 3.84% in the year to November 2017, according to the latest figures from information and analytics specialist, Reidin.

Apartment prices in Dubai fell even more, decreasing 4.19% in the last year. The value of villas fell 2.41% annually.

Prices of rental properties in the year to November 2017 decreased 6.46%, apartment rentals by 6.4% and villa rentals by 6.8%.

The Abu Dhabi market suffered even higher price drops. Overall, annual property prices fell 9.62%, with apartment prices down 10.48% and villa values down 6.86% in the 12months to November 2017.

The only monthly gain was in villa values, which rose 0.23%.

Taking into account the last two years, prices have fallen 4.16% in the Dubai property market at 12.09% in the rental sector.

Abu Dhabi property prices are down 12.32% in the last two years and 17.24% in the rental sector.

Rental yields are similar in both Emirates, at 7% in Dubai and 7.1% in Abu Dhabi.

According to UAE property agent, Core Savills, Dubai’s property sector has gone through a cycle of decline, recovery and decline in the last decade.

Dubai is in the unique position of having recovered from 2011-2014, before declining again from 2015-2017.

The agency says, “Dubai’s distinct rental wave can be attributed to many coinciding factors. Dubai was able to see a swift recovery in rents following the global financial crisis due to significant fiscal stimulus from the government, which kickstarted growth and fuelled job creation thus driving up demand for rental property. Nevertheless, after reaching a peak in 2014, rents declined again, mirroring the decrease in oil prices which had resulted in many job losses and contraction in domestic demand.”
Chief Executive Officer, David Godchaux, explains, “Given that Dubai continues to be a fast-growing economy, largely reliant on expatriate tenant demand, that has historically been responsive to Dubai’s economic fluctuations, the speed with which the city traversed its rental cycle is not surprising. As the UAE sees further economic diversification and private sector-led growth, Dubai’s rental cycle is likely to decelerate and lengthen.”
The prime residential rental market, which started to soften in late 2014, has more room to contract. However, with capital values also softening considerably, some products in this segment still hold stable yield values, he says.
And the rental sector is expected to struggle in future, Mr Godchaux believes. “With relatively slower falls in rentals in core mainstream locations over the last few quarters, this segment is expected to be sluggish in moving towards the bottom.
“Gross yields continue to be upwards of 8% for apartments across most mainstream markets, however, some degree of yield compression is expected through further rental decrease. As the next cycles of lease renewals inspire relocations, particularly among tenants whose rents are yet to reflect the softening market, we expect rents to continue softening. Although widespread, the magnitude of these drops is expected to remain limited.”
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