News

Events

Entertainment

Restaurants

Shopping

Business

Real Estate

Education

Education

Internet Services

Home / Features / Dubai’s residential rental market contracted during Q1

Special Features

Dubai’s residential rental market contracted during Q1

Dubai’s residential sector experienced further modest declines in rentals during Q1 2017, with a 1% dip quarter-on-quarter, driven by an increase in the number of available housing options and more constrained demand, according to the Q1 Dubai Market View by global real estate advisor, CBRE. Rental rates fell by an average of 1%, primarily driven by pressure on larger apartment unit typologies. Landlords are also becoming increasingly flexible with rental rates and tenants are able to negotiate. Residential sales prices remained relatively stable during Q1 2017, declining by less than 1%.

Future supply levels continue to rise as developers make a concerted push in the build up to the Expo 2020 event.

“Consequently this is driving annual deliveries well above the five-year average, with expectations that these numbers will continue to rise in the short to medium term as new master plans come on stream,” commented Mat Green, Head of Research & Consultancy UAE, CBRE Middle East.

“Amidst a flurry of off-plan launches the competition to attract investors is also rising, meaning developers are having to become more creative in order to sustain desired levels of sales velocity. This has driven the formulation of new sales strategies aimed at expanding the size of the potential investor base and to appeal to new demographics of untapped demand. The main concentration of these strategies has been towards payment plans and lower ticket prices,” continued Green.

Dubai’s hospitality sector continues to attract an increasing number of overnight visitors

According to the report, overnight visitors reached 14.9 million during 2016, reflecting close to 5% growth over the previous year’s performance. The emirate witnessed substantial double digit growth in the number of tourists from China, India, Pakistan, Philippines, and Russia.

Despite the increase in visitors, Dubai’s hospitality market continues to witness declining Average Daily Rates (ADRs) and Revenue per Available Room (RevPARs), due to the rising inventory levels and a strong US dollar, which is making the Emirate a comparatively costly destination for European visitors, according to data from STR Global. The volume of new hospitality supply continues to rise, with around 35,000 new hotel keys and hotel apartments potentially to be delivered before the end of 2019.

“With inventory levels increasing at such a rapid rate, at a time when other headwinds continue to have an impact, we expect to see further decreases in average ADR’s during the course of 2017 as revenue pressures prevail.”

“According to STR’s year-on-year performance figures for February, average ADR’s are down by around 5%, whilst RevPAR’s are down 1.3%. This shows a continuation of the deflationary revenue trends that have impacted the market over the past two years. However, positively, occupancy rates were found to be up by 3.8% year-on-year, underlining the relative resilience of the local market despite the obvious challenges within the wider tourism environment,” continued Green.

Dubai’s office market remained relatively stable during Q1

According to the report, the office market has not witnessed any major shift in activity levels, meaning in weak fundamentals for secondary locations and sustained demand for good quality accommodation in prime areas.

“Onshore building requirements have witnessed a slowdown, which has resulted in a softening of rentals for non-freezone buildings along the Sheikh Zayed Road and parts of Business Bay. Large corporate occupiers are still demanding and seeking good quality efficient accommodation over contiguous floors, particularly within freezone locations,” commented Green.

Average prime rentals have remained unchanged quarter-on-quarter at AED1,920/m2/annum, underlining the limited availability of high quality office stock, aiding in sustaining the rates. Secondary office rentals continued to experience marginal deflationary trends, with rents falling by approximately 1% during the quarter to AED1,067/m2/annum.

Mat Green said, “Dubai is expected to see a modest rise in economic output during 2017, driven by increased government spending and new job creation. The non-oil sector will continue to propel the Emirate forward, with a forecasted growth rate of 3.1%, according to the Economic Development Committee.”

2017 is likely to deliver a somewhat mixed performance for Dubai’s real estate sector, with a combination of recovery, stability and further contraction, depending on the specific sector, location and quality attributes of the asset.

We accept Guest Posts