Apartment prices in Dubai have fallen 11 per cent in the past 12 months and will decline further because of tighter regulations, rising inflation and a strong UAE currency, industry consultants JLL said on Tuesday.
Rents have proved more resilient because higher sales transaction fees and tougher mortgage requirements have made it more difficult for residents to make outright purchases. However, rents fell 1 per cent in the third quarter.
Dubai now has 452,000 homes, up by 1,700 in the third quarter, JLL estimates. Some projects scheduled for handover to buyers in the second half of 2015 have been held back until 2016-17, it noted, attributing the delays to the softening market and a desire among developers to “phase projects in line with demand”.
Inflows of cash from troubled areas of the Middle East helped Dubai’s property sector recover from a crash in the previous decade, but that momentum has sagged since the end of 2013 and prices are again in retreat, JLL and other real estate analysts say.
Apartment sales prices in the third quarter of this year fell 3 per cent versus the preceding three months and 11 per cent year-on-year, while rents dropped 1 per cent on both a quarter-on-quarter and annual basis, JLL wrote in a report.
Authorities have set mortgage ceilings and raised transaction taxes to reduce speculation in the property market, while the UAE dirham is pegged to the U.S. dollar, which has gained 13 percent against the euro in the past year.
These factors have combined to make buying property more expensive for foreign residents and foreign-based investors, while a shortage of middle-income housing in Dubai is a growing problem.
This has led to a slump in the number of sales and a drop in prices “to more sustainable levels”, JLL wrote. “Prices are expected to continue softening over the remainder of the year and into 2016,” before they again rise ahead of Dubai hosting the Expo 2020 exhibition, it predicted.
House prices also fell in the third quarter, with sales down 3 per cent on the second quarter and 7 per cent year-on-year, while rents were down 2 per cent over both time frames.
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