By Atique Naqvi
Residential property continues to grow in Abu Dhabi, while the segment experiences a slowdown in Dubai in the second quarter of 2014, according to Jones Lang LaSalle (JLL).
In a statement shared with TRENDS, the property research and advisory firm says sales prices in Abu Dhabi for residential units – apartments and villas – increased for the sixth successive quarter, with a seven per cent increase in Q2 2014, bringing the average increase during the first half of the year to 17 per cent.
In Dubai, however, average sales prices grew by six per cent in the second quarter – down from ten per cent in the previous quarter. “With signs of reduced sales activity, particularly in the secondary villa market, it is likely that asking prices in this sector will decline further in the coming months,” JLL says.
Sales volumes have declined in all sectors recently, with data from the Dubai Land Department showing villa sales in May 2014 down by almost 50 per cent when compared with the same month in 2013.
Craig Plumb, head of research at JLL Mena, says: “While the retail and hotel sectors continue to experience growth, recovery in the office sector remains patchy, with the large level of supply and high vacancy rates placing pressure on overall rental values. The major news about the proposed Mall of the World in the Umm Suqeim area reflects confidence for both the retail and hotel sectors.”
With limited additions to stock and continued interest from retailers, rents in the best performing super regional malls have increased by as much as 12 per cent over Q2. “Increases have been more modest in smaller centres and secondary malls, but the retail sector has benefitted from higher spending from both tourists and local residents. Confidence in the retail market is reflected in the announcement of the Mall of the World (a planned new mall around twice the size of the Dubai Mall, on Sheikh Zayed Road immediately opposite the existing Mall of the Emirates),” says Plumb.
In the commercial property segment, overall market vacancies in Dubai remain high (25 per cent), there are pockets of shortage that have resulted in major occupiers seeking to have new space built for their requirements, rather than occupy sub-optimal space in existing buildings, says a JLL report on the Dubai real estate market.
In Abu Dhabi, one of the major drivers of the property sector is the government. Plumb of JLL says: “The Abu Dhabi market continues to be dominated by government-related investment, with short-term demand being fuelled by investment and job growth from new major government-backed construction projects, such as the airport expansion, Etihad Rail, Saadiyat Island museums and other major infrastructure, economic and social development initiatives.”
“A sustainable recovery requires the government to continue implementing supply controls, as many developers are now reviewing schemes that had been placed on hold following the market downturn,” the head of research at JLL Mena concludes. “While new supply is needed – particularly of quality residential product, supply controls are required to ensure the right product is prioritised in locations with existing infrastructure.”