New stocks set to exert pressure on realty prices

Dubai Marina and Jumeirah Beach Residences recorded a decline of close to 10 per cent in sales.

Top end of the UAE property market is coming under  increasing pressure as buyers look to the affordable sector while new stock poses to exert further downwards pressure in the next few months; and through to 2016 with 13,000 more apartments due for completion, real estate services company Asteco said.
In its mid-year UAE market report, Asteco said the second half of the year would see around 7,000 units come online, and while average rental rates have been relatively stable over the last few months, albeit with significant differences between areas.
"We expect the new stock to exert further downwards pressure in the next few months; and through to 2016 with 13,000 more apartments due for completion," the real estate company said.
Highlighting stability in Dubai with a continued focus towards the affordable segment, in contrast to the high end market which experienced declines of up to 10 per cent, the report stressed that competitive prices are key to securing investor commitment for new developments in Dubai and Abu Dhabi markets.
According to Asteco, affordable apartment units at IMPZ, Discovery Gardens and Dubai Silicon Oasis showed three per cent, six per cent and two per cent sales growth over the summer months, whereas Dubai Marina and Jumeirah Beach Residences recorded a decline of close to 10 per cent while the Palm Jumeirah recording year on year reductions of 13 per cent.
John Stevens, managing director, Asteco, said newly launched properties with reasonable price and/or payment plans, and healthy prospective return on investment, or ROI, have been attracting solid investment interest, which will define market movement in the months to come as affordability remains a major driver for sales.
The report said Abu Dhabi's residential market saw a general slowdown in transaction activity over the extended summer period, bar increased demand at Khalifa City, for villas in particular, but rental and sales rates remained stable. However, overall, the market is continuing its positive growth trend of the last 48 months.
In Abu Dhabi, Asteco expects rental rates to hold steady with new supply levels limited. 
"Annual rental rates for apartments and villas have increased by an average of 18 per cent and nine per cent, respectively, over the last three years, with the growing confidence and improved sentiment in the Abu Dhabi market over the last two years boosting investor ROI; however, the decline in oil prices has prompted a general slowdown in investment this year," said Stevens. Apartment rental rates in the Northern Emirates also saw minimal changes over July and August with rents in Ajman, Umm Al Quwain and Sharjah remaining stable overall, with Ras Al Khaimah seeing a nominal one per cent decline.
The Al Majaz, Al Qasimiya and Al Khan areas of Sharjah also recorded a marginal decline with a handful of new buildings coming online and landlords offering one-month's free rent in a bid to secure high occupancies.
"Reducing vacancy levels are a red flag for Sharjah's residential rental market, which is also increasingly in existing tenants favour as they come into a stronger negotiating position when renewing current contracts," said Stevens.
Ajman and Sharjah residents are also looking forward to easing traffic circulation with Sharjah Transport Authority recently starting work on an Dh11.4 million roadwork project in the vicinity of City Centre, which is expected to be ready by year-end.
- issacjohn@khaleejtimes.com