Dubai real estate sector sees slow start to 2016 as rents and sales fall
Dubai’s real estate sector further softened in the first quarter of 2016 as continuing lower oil prices and the strong US dollar continued to impair the purchasing power of the region’s investors, according to consultancy firm JLL.
The residential sector witnessed a continuing decline in sales and rentals, with the prices of apartments and villas in the emirate dwindling by 10 per cent and 11 per cent year-on-year respectively during the period under review, JLL said in its latest Dubai Real Estate Market Overview.
Apartment sales dropped by two per cent quarter-on-quarter and rentals fell by three per cent, whereas sales of villas were flat and rents were down by one per cent during the quarter.
Rents for both apartments and villas recorded a five per cent year-on-year drop.
The market saw a supply of 2,200 new residential units during the first three months, taking the total stock to 458,500 units.
The consultancy states that there has been continued interest amongst developers in the affordable sector of the residential market.
The hospitality sector, meanwhile, saw occupancy rates remaining high, but average room rates continued to drop, while the retail sector was flat during the three months leading up to March 31.
The office market continues to be the worst-performing sector and has been has been stuck at the bottom of the cycle for a number of years, JLL has found. Nevertheless, Grade A office buildings continue to generate strong demand in the market.
“Various factors are bringing the market towards the bottom of its cycle. On one hand, the strong dollar is impacting the USD-pegged GCC currencies, which is making Dubai real estate more expensive for buyers from non-USD-pegged markets. On the other hand, the continued period of low oil prices is tightening regional liquidity, which is also affecting the real estate market,” said Craig Plumb, Head of Research at JLL MENA.
“Despite the continued short-term softening, market sentiment remains relatively positive towards the medium and longer term, due to future growth and demand drivers, such as Expo 2020 and other mega infrastructure developments,” Plumb added.