Affordable housing market holding up on limited supply in UAE capital as Dubai adds 2,000 affordable units in first half of the year – report
While the property sector has registered a general slowdown across the UAE, the Dubai and Abu Dhabi markets have seen trends that are unique to each respectively, says a new report released at Cityscape Global by Asteco.
According to the report, Dubai experienced a slow first six months of the year with developers slowing the pace of project completions and handovers due to the forecasted oversupply of residential properties on the market, which prompted a slight decrease of around 2% and 1% respectively on rental rates for apartments and villas.
In Abu Dhabi, meanwhile, the catalyst for the slowdown has been the cumulative effect of falling oil prices and the resulting cuts to government budgets over the last 18 months. This has led to job cuts in the last six to eight months, the report found, leading to H1 2016 residential rental rate declines of 3% on average – with high-end units down by 4% – along and a subdued sales market.
“We are seeing two unique pictures emerge for the residential sector in both emirates. What is interesting to note in Dubai is the decision of families to downsize and even send spouses and children home in an effort to save money,” said John Stevens, managing director, Asteco.
“We are seeing signs of this in Abu Dhabi with a migration or downsizing mainly from high-end large units to more affordable developments, which has led to a rise in vacancy rates for larger units and which could prompt an increase in rental rates for smaller units in more desirable buildings,” he added.
Dubai added 2,000 new primarily mid-level and affordable apartments and 200 villas and townhouses in H1 2016, Asteco said. These include affordable developments such as Siraj Tower at Arjan and 400 units in Dubai Silicon Oasis; the mid-range Ajmal Sarah Tower and Dubai Sports City, Canal Residence West; and, at the top end, Palm Jumeirah’s Osaimi Apartments.
The Asteco report highlighted substantial interest in Jumeirah Village from both end users and investors, with buyers recognising the potential of the community from a locational point of view in comparison to newer projects launched south of Mohamed Bin Zayed Road.
Apartment prices in most communities continued to be under pressure with an overall price reduction of 3% during H1 2016, though prices are still 64% higher than 2011, the report revealed. For the villa market, rates were broadly stable over the last six months with an average increase of 0.3%, with a trend towards smaller two- to four-bedroom homes in communities such as Arabian Ranches, The Springs and Mudon, still prevalent.
“We expect to see further marginal declines in values over the next six months as the market looks likely to bottom out by year end with, at most, a 5% decline. This could be offset by potential increased transaction volume as lower prices unlock demand and stimulate renewed interest from single-unit buyers for soon-to-be-completed buildings,” said Stevens.
“From a rentals perspective, demand for studio, one and affordable two-bedroom units is likely to remain strong, with a potential increase in rates in some areas as occupancy levels improve.”
Limited supply of new H1 released property in Abu Dhabi helped to limit any major reduction in rental rates, with just 800 apartments added in the first six months of the year resulting in an overall drop of 3%, the report said. This trend was replicated in the villa market, albeit at a reduced rate of just 1%.
“We are still seeing good levels of demand for affordable products like the Al Ghadeer and Al Reef townhouses, with no decline in sales prices, which confirms the appeal, and shortage, of this kind of product in the market,” noted Stevens.