Dubai’s residential sale prices remained stable during the third quarter of 2017, while an increasing number of new developments are shifting homebuyers’ attention to the off-plan market.
According to JLL’s latest Dubai Real Estate Market Overview report released Tuesday, the total value of transactions for existing residential properties from January to August has exceeded AED 13.7 billion (US$3.73 billion), up 28% year on year. A total of AED 2.7 billion (US$740 million) of sales was recorded in August alone.
Sale prices for both villas and apartments remained stable over Q3, while rents continued their low single-digit declines, the report pointed out.
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Landlords are cutting asking rents by as much as 5% to 7%, even in some of Dubai’s most popular areas, as vacancy rates rise and new units continue coming onto the market, according to the JLL report.
A separate luxury residential report covering the third quarter by Luxhabitat, a high-end property brokerage in Dubai, revealed that despite underperformance of the secondary prime residential market, the average price per square foot for high-end homes has remained flat this year.
Luxhabitat data shows, as of Q3, the average price for prime residences is AED1,441 (US$392.31) per square foot. The prices had remained at the AED1,400 (US$381.15) per square foot level since Q2 in 2016. The total volume of high-end transactions in the past quarter was AED1.9 billion (US$520 million).
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A number of developers launched new mega residential projects at Cityscape Global, a trade show for the real estate industry held in Dubai September. And for the first time in 10 years, direct sales of UAE properties were allowed at Cityscape, which piqued the interest of potential buyers, who were able to compare between various launch offers across a variety of properties.
The stronger market sentiment driven by Cityscape Global and more attractive payment terms, however, could also increase the dangers of a potential oversupply.
"Generous payment terms and guaranteed rent periods, although attractive to investors, could result in a future ‘real estate bubble’," said Craig Plumb, head of research for the MENA region at JLL, in its report.
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And the increasing supply of new homes would particularly impact the secondary prime home market.
The Dubai luxury property market report by Luxhabitat pointed out that since Q4 2016, the demand for luxury residential property has shifted to the off-plan market. As such, price adjustments in the secondary market prices are expected. "Eighty percent of the off-plan luxury market are going to investors who are hoping for capital appreciation. Off-plan properties also have the added advantage of flexible payment plans," said Alexander von-Sayn Wittgenstein, Luxury Sales Director at Luxhabitat, in the report.