By Adrian Bishop
Two-thirds of Dubai property sales at the end of 2017 were off-plan – with sales being finalised before the homes were built, a new reports states.
This overwhelming off-plan sales activity is further delaying the recovery of the wider property market, says consulting firm, ValuStrat.
In the last three months of 2017, residential property values in Dubai fell 1.9% year-on-year, according to the Dubai Real Estate Market 4th Quarter 2017 Review, which is based on 16 apartment and 10 villa locations.
This left the market 15.3% below its 2014 peak. Jumeirah Lake Towers saw the largest quarterly fall of 4.4% followed by Arabian Ranches, which was down 2.6%.
However, established prime locations such as Downtown Dubai, Palm Jumeirah, Emirates Hills and Jumeirah Islands all saw gains.
Declan King MRICS – Managing Director & Group Head Real Estate, says, “The main trends of 2017 were the rise of off-plan launches and their impact on the wider residential market – high profile successes in the new homes sector came at a price for the existing secondary market, with price falls recorded in both sales and leasing rates for many established locations.”
In all, 66% of residential home transactions were off-plan and many were within established districts. These were headed by Business Bay with 81% off-plan sales, Downtown Dubai on 78%, Dubai Silicon Oasis at 77% and Jumeirah Village with 71%.
Although the share of off-plan sales was substantial, it was down from 77% in Quarter 3, which could signal a change in market conditions, says Haider Tuaima, Head of Real Estate Research at ValuStrat.
“Interestingly, the share of off-plan transactions declined this quarter as compared to Q3, and at the same time the number of ready homes sold had increased by 25%. If this trend continues then we might see a buyer’s market shift towards ready properties within established locations.”
In 2017, the total new supply of residential stock was estimated at 25,000 homes, 72% of which were completed. Most are in Dubailand, International City and Dubai Silicon Oasis.
Many of the projects delayed from the past 18 months are either now completed or expected to be released during the coming year, putting the total estimated residential supply for 2018 at just over 60,000 homes.
The Residential ValuStrat Price Index (VPI) recorded declines in 40% of freehold villa locations and a third of apartment locations.
Only four locations saw rises in annual capital appreciation, Jumeirah Village Triangle (+5.7%), Downtown Dubai (+7.6%), Business Bay (+4.9%) and Discovery Gardens (+3.7%).
Year-on-year declines came in Arabian Ranches (-2.4%), The Meadows (-4.3%), Dubai Marina (-5.1%), Jumeirah Lake Towers (-7.5%) and International City (-4.5%).
There were double-digit annual falls in rents, which were down 13.2% for apartments and 12.3% for villas. At the same time, landlords have become more accommodating in reducing rents for existing tenants approaching lease renewal.
The migration from high rise to low rise continued in Quarter 4, as for a budget of AED170,000-240,000 for a three-bedroom apartment in Dubai Marina, you can also rent the a three-bed villa in The Springs, Arabian Ranches, Jumeirah Park or Victory Heights.