Negative market sentiment continued to weigh on rents and sales prices in Dubai in the first quarter of 2018. This was true across both the residential and office markets.
"Dubai's real estate market has adjusted to more negative market sentiment in Q1 2018, resulting in developers focusing more on affordable options across all segments of real estate," said Craig Plumb, head of research at JLL Mena.
"With rents continuing to fall across the office and residential sectors, building owners and landlords are increasingly looking to incentivise in order to retain current tenants and have done so by setting more competitive prices and more attractive lease terms," Residential developers have offered smaller units at competitive prices in areas known for more affordable housing, such as Dubai South, Dubailand and Jumeirah Village Circle," he added.
With high volumes of new supply resulting in a continued decline in rents and sale prices, Dubai's Real Estate Regulatory Authority (Rera) has floated the idea of tightening regulations on off-plan sales by requiring developers to own the land. The Rera is even considering making developers contribute 50 per cent of the total construction cost into an escrow account before launching pre-sales.
Approximately 3,000 units entered the market in the first quarter, with apartments comprising more than 78 per cent of completions, estimated JLL. Notable projects include Marina Gate 1, Rivington Heights in International City and Serenia Residences on Palm Jumeirah.
A further 42,000 units are currently under construction and scheduled for delivery by the end of 2018. Private developers aim to add 3,000 units by the end of the year and an additional 3,100 units between 2019 and 2020, said a JLL report. Their primary focus is on apartments in communities such as International City, Arjan and Majan. The three main developers, who currently account for more than 20 per cent of under construction projects, are Damac, Emaar and Dubai Properties.
Quarter-on-quarter apartments rents remained largely unchanged in the first quarter, while villa rents declined at a faster rate (2.8 per cent), compared to the previous four quarters. Year-on-year, rents have declined by 6.5 per cent and 10.2 per cent for apartments and villas, respectively, according to JLL data.
Sales prices have also continued to decline but at a slower pace than rents. Villa sale prices have declined by 1.3 per cent over the quarter and by 4.1 per cent over the year. Apartment sale prices have declined by 0.3 per cent and 4.1 per cent respectively.
Economic conditions also hindered performance in the office sector in the first quarter, with tenants remaining cautious and cost-conscious and continuing to seek smaller office units.