More affordable homes coming to Dubai

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Mat Green
Mat Green

Dubai - JLL puts an "affordable" sales price in the UAE at around Dh790,000 and affordable annual rent at around Dh72,000.

By Issac John

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Published: Sat 12 Sep 2015, 12:00 AM

Last updated: Sun 13 Sep 2015, 10:23 AM

The property market in Dubai will see a higher proportion of residential projects being launched at lower price points, stimulating the drive to affordability, a trend that will help prevent a bigger correction in the future, a market report by a global real estate advisor said.
In the third quarter, as residential rents in Dubai remained stable, sales continued to decline by six per cent year on year, according to a CBRE report.
Dubai's residential market is highly fragmented, with some affordable locations achieving growth, while other areas experienced more pronounced drops. "There was further compression within the sales segment, with sales rates declining around two per cent from second quarter 2015 and around six per cent year-on-year," it said.
"While global economics have reduced investor sentiment and partially impacted Dubai's residential sales, the slowdown is largely attributed to a price correction resulting from market stabilisation. In light of lower activity, developers are incentivising sales by offering more flexible payment plans, some of which are back-loaded and provide post-handover payment options," said Mat Green, head of research and consultancy for the UAE at CBRE Middle East.
Green said the residential sector is likely to continue to stabilise in the coming months.
"Nearly 20,000 new units could enter the market during the course of the year, much of which will be located in the secondary submarkets of Dubailand. The market will see a higher proportion of residential projects being launched at lower price points, inducing the drive to affordability in the sales market. This is a positive trend and will help prevent a bigger correction in the future," Green explained.
According to JLL, another global real estate consultant, only 22 per cent of 19,500 residential units launched in 2015 to date in Dubai fall in the affordable to middle-income housing criteria.
JLL puts an "affordable" sales price in the UAE at around Dh790,000 and affordable annual rent at around Dh72,000.
The CBRE report said the office segment witnessed steady rental conditions amid limited supply growth. Prime office rents remained unchanged for the sixth consecutive quarter, while secondary locations have witnessed marginal growth.
Single-held quality office assets continue to generate high demand from corporate occupiers, although the market is being held back by the lack of good quality supply being delivered.
"This will start to change from 2016, with the delivery of One JLT and Dubai Trade Centre District Building C1, both of which have generated high levels of pre-leasing activity, which broadly reflects the maturing nature of the Dubai market," said the CBRE report.
Hotels in Dubai are experiencing softer performance due to fluctuations in the global currency markets and geopolitical challenges. The currency devaluation in some of Dubai's primary source markets has pressured demand, causing average daily rate to decline seven per cent year-to-date to $227.
This corresponded to an eight per cent drop in hotel room revenues, which was further suppressed by lower occupancy levels (-0.9 pp year-to-date).
"Despite the decline, average occupancy levels across the hotel market during the first seven months of 2015 remained relatively buoyant at 77 per cent. However, Dubai's robust pipeline of hotels could place additional pressure on average rates, impacting hotel performance in the short run," added Green.
The hospitality sector is likely to see a subdued performance until the end of the year.
Dubai is being challenged by a diversion of tourism to more affordable regional destinations, while the robust pipeline of rooms could place additional pressure on supply and demand dynamics in the coming years.
The retail sector has recorded steady performance during the first three quarters of the year, with major shopping malls demonstrating high occupancies along with stable lease rates, the report said. Strong consumer demand from UAE residents and international tourists has functioned as a catalyst for the sector's growth.
Development activity remains buoyant with 620,000 square metres of leasable areas set to enter the market in the coming four years.
Community malls and expansions of existing shopping centres comprise the majority of new openings in 2015, including the Golden Mile Galleria recently opened on Palm Jumeirah.
"A growing resident population combined with high per capita income have contributed to robust growth within the retail sector. Dubai remains a top destination for retailers, functioning as a gateway city for brands seeking to establish a presence in the region. However, on the consumer side, reduced economic sentiment amid lower oil prices, coupled with lower tourism demand could constrain spending from residents and tourists alike," added Green.

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