Prop­erty buy­ers turn scarce in Dubai

The Pak Banker - - BUSINESS -

Prospec­tive buy­ers are seem­ingly in no hurry to pick up prop­erty in Dubai - this dis­in­ter­est is push­ing prices even fur­ther into soft ter­ri­tory. Based on es­ti­mates by the con­sul­tancy ValuS­trat, apart­ment prices in Busi­ness Bay saw a drop of 6 per cent in the sec­ond quar­ter of the year com­pared to what they were in the first three months.

Other clus­ters that saw drops dur­ing this pe­riod were In­ter­na­tional, Sports City and Dis­cov­ery Gar­dens, all three by an av­er­age 4 per cent. Across the 26 lo­ca­tions tracked by ValuS­trat, Dubai apart­ment and villa mar­kets recorded declines by 2.5 per cent and 2.1 per cent quar­ter-on-quar­ter re­spec­tively. The me­dian value for an apart­ment in Dubai is now Dh1,324 a square foot, while for vil­las it is Dh1,368 a square foot.

If the cur­rent level of declines were to con­tinue through the rest of the year, that might be a prompt for un­de­cided in­vestors to fi­nally get into the mar­ket. As things stand now, the pric­ing dy­namic is very much in the buy­ers' favour, with sellers ex­pected to be­come even more gen­er­ous with pay­ment terms and in­cen­tives to buoy de­mand. Sellers stick­ing to their price de­mands are find­ing no tak­ers even for prop­er­ties that have been listed for three to four months. By the looks of it, buy­ers are hav­ing it their way - no in­cen­tives are be­ing of­fered on prices or pay­ment terms, they are not in­ter­ested.

By ValuS­trat's es­ti­mates, the year-on-year de­cline in Dubai's home prices are around 11 per cent.

Of­fi­cial num­bers also bear out the depth of the fall in trans­ac­tional ac­tiv­ity - the Dubai Land Depart­ment saw 64 per cent fewer residential deals reg­is­tered in the sec­ond quar­ter against the ear­lier one, though av­er­age ticket sizes were 'marginally' higher at Dh1.6 mil­lion. De­vel­op­ers and buy­ers will also be keep­ing close watch on another de­tail that will have its say on pric­ing pres­sures.

In the first six months, an es­ti­mated 5,400 homes were com­pleted. For the full year, the sup­ply of apart- ments is pro­jected at around 26,100 apart­ment units and 2,400 vil­las. On the launch side, there were 18 off­plan residential projects in the sec­ond quar­ter and a fur­ther 5,000 units were added to the residential pipeline, slated for com­ple­tion by 2019.

"Residential projects with ap­prox­i­mately 3,000 units - ini­tially sched­uled for com­ple­tion this year - are de­layed and due for han­dover dur­ing 2016," the ValuS­trat re­port notes. "A fur­ther 26,200 apart­ments and 2,300 vil­las [are] to be com­pleted in 2016." For the mo­ment, at least, none of this is telling on residential rents. Out­side of the city's free­hold clus­ters, in the main residential ar­eas, rents are still firm­ing up. Some of the hikes are over and be­yond what the Land Depart­ment's Rental In­dex sug­gests is ideal.

Clearly, the residential mar­ket is mov­ing in a way com­pletely at odds with what is hap­pen­ing on the sales side. Land­lords are call­ing all the shots, re­fus­ing to buckle by low­er­ing their rents even when their prop­er­ties are ly­ing va­cant. It re­mains to be seen whether an un­cer­tain job mar­ket could in­duce land­lords to change their ways. Ac­cord­ing to ValuS­trat's es­ti­mates, rents at the lo­ca­tions it tracks were down 2.1 per cent in the sec­ond quar­ter from a year ago. "Over­all residential ask­ing rents [have] re­mained sta­ble since the start of 2015," it says.

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