Residential property prices in Dubai fell by almost 4% in the first six weeks of this year with both apartments and villas seeing declines, the latest research shows.
Prices for apartments fell by 3.7% and villas by 3% respectively, the latest report from Phidar Advisory shows. Sales increased by 1.7% in January, the data also shows.
Price falls are outpacing rent declines, pushing yields up to 7% for apartments, the report shows, with the report pointing out that residential investment potential is at a five year low.
However, the report notes that within this overall figure, apartment volumes were up almost 8% in January, while single family home volumes halved in January compared to the same period in 2014.
Apartment lease rates remained stable with a nominal decrease of 0.5% while lease rates for single family homes decreased by 2.4%.
‘Our index indicates that the propensity for investing in Dubai real estate is at a five year low point. This is a first draft and we are developing more complex iterations integrating additional variables that influence capital flows,’ said Jesse Downs, managing director of Phidar Advisory.
The report downgrades rent projections to softening and says that sale price declines will continue to outpace rent declines, allowing yields to gradually expand through 2015.
‘As long as general price deflation is averted, rent stability or softening can help control labour costs, which can facilitate business and economic growth. Ideally, this is paired with countercyclical monetary and fiscal policies to the real estate industry that facilitate economic diversification,’ explained Downs.
The report also points out that, while the US dollar remains strong, demand for Dubai real estate will likely remain low and yields should continue to guide market trends. ‘Recent transaction volume contraction was caused by dwindling domestic and foreign demand,’ added Downs.
Meanwhile, figures from the Dubai Land Department shows that Indians continue to top the list of expat property buyers in Dubai. Total investment by Indians in the realty market increased marginally to Dh18.123 billion from Dh18 billion in 2013. Br
British expat buyers were next but the amount investment fell from Dh10.4 billion in 2013 to Dh9.318 billion in 2014. Pakistanis coming third on the list with property purchases worth Dh7.588 billion, down from Dh8.6 billion in 2013.
Citizens of Gulf Cooperation Council (GCC) states bought property worth Dh32 billion through 7,186 investors in 2014.
Overall there are more than 140 nationalities investing in the property market in Dubai with total real estate transactions amounting to Dh218 billion in 2014.