Dubai's real estate market displayed several encouraging signs over Q1, including an annual rise in sales volume as well as a downturn in the pace of value declines.
The positive sentiment of the market is likely to be tempered in the near-term, owing to the COVID-19 outbreak and impact, according to real estate services firm Chestertons' recent report titled Observer: Dubai Residential Report Q1 2020.
Q1 2020 saw the introduction of a total of 4,458 units across all freehold areas in the emirate; approximately, a 30% decrease compared to Q1 2019.
"The drop in new launches was a welcome move forward for a sector where oversupply has long driven down values," head of strategic consultancy, Chestertons MENA, Chris Hobden, said, adding that it was a positive step towards more sustainable levels of development.
“Dubai’s residential sector demonstrated a resilient start to 2020, with a year-on-year increase in sales volume reflecting more positive buyer sentiment. While residential values continued to fall over the first quarter, the rate of decline lowered on both an annual and quarterly basis."
In the sales market, average apartment prices across the emirate saw a 1.8% decline in Q1, compared to a fall of 3% in average values in Q1 of the previous year.
Dubai Sports City witnessed the largest price decline, falling from AED692 to AED670 per sq ft, followed by Discovery Gardens, that saw a decline in prices from AED576 to AED558 per sq ft.
More resilient locations witnessing declines of under 1% from the previous quarter, according to the report, included The Greens and International City. Average apartment prices across Dubai Land were stable, standing at AED700 per sq ft.
The only area to witness a slight rise in average prices during Q1 was Business Bay, the report stated, from AED1,000 to AED1,007 per sq ft.
Furthermore, villa sales prices across the emirate fell by 0.8% over Q1, which, as in the case of apartment prices, was a significant slowdown compared to the same period in 2019, the report stated.
In terms of villas' sales prices, Jumeirah Park saw the steepest quarterly price fall, with average values reaching AED725 per sq ft from AED740 per sq ft, a decline of 2%, in comparison to the 8% decline in the previous quarter.
Both Palm Jumeirah and The Lakes witnessed quarterly declines of less than 1%, while the only area to see an average increase was The Meadows/The Springs, where average prices reached AED832 per sq ft.
In its report, Chestertons noted that oversupply is a continued trend that has hampered the villa market in the emirate, subsequently causing downward pressure on prices.
Meanwhile, the villa rental market witnessed a moderate decline of 1.3% with the sharpest rental rate falls witnessed in Jumeirah Golf Estates and Arabian Ranches, where there were average declines of 2.2% and 2.3% respectively, compared to the previous quarter.
Several villa communities have displayed resilience with no change in the rental rates in Q1, including Palm Jumeirah and Jumeirah Village Triangle (JVT).
Dubai’s apartment rental market rates declined by 1.5% in Q1, with current projects hinting at the hindrance of the short-term rental market, likely to be caused by the ongoing novel coronavirus, the report highlighted.
Dubai International Financial Centre (DIFC) saw quarterly rent declines of below 1%, with studio, two and three-bedroom rates holding steady in Q1. The Views witnessed the sharpest quarterly fall in average rents, at 2.3%, followed by Dubai Land at 1.9%. On an individual unit-type basis, rents for three-bedroom units at The Views saw the steepest decline, at 3.4%.
Speaking about the impact of the novel coronavirus on the Dubai real estate market, Hobden, said: “It is likely that COVID-19’s impact will be reflected in the Q2 figures, with disruption to the transactional process itself, coupled with an overall economic contraction, likely to cause near-term challenges.
While COVID-19’s overall impact on Dubai real estate depends largely on the pandemic’s duration, and the nature of the public policy response, the residential sector will clearly face significant headwinds over coming months.”
Hobden highlighted that the impact of the COVID-19 prevention measures taken by Dubai authorities including rental relaxations, waived fees, suspension of evictions applicable to residential and commercial sectors through March and April, lenient payment terms, and tenant relief packages, will slowly is surely impacting the Dubai rental market.
From a transaction perspective, overall, residential transactions reached 9,591 units during Q1, representing an annual increase of 13% supported by a 20% increase in the transfer of existing properties, with off-plan sales volume rising by 9% year-on-year.
Dubai Marina saw the highest volume of completed units transfer in Q1, at 375, closely followed by Jumeirah Village Circle (JVC) at 315 units.
Recently, UAE property website Property Finder’s data and analytics platform, Data Finder, has revealed a 9.74% growth in Dubai's real estate market for Q1 2020 after registering a total of 10,243 transactions compared to 9,317 in Q1 2019, Construction Week reported.
Source: Construction Week Online