Dubai residential properties display 11.2% annual fall in capital values

ValuStrat report finds downward trend resulted in 31.1% citywide capital value loss since peaks of mid-2014

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Residential properties across Dubai displayed an overall 11.2% annual fall in capital values, with quarterly declines decelerating to 2.6%, a leading local consulting firm has found, in its Dubai real estate review for the third quarter of 2019.

In its report, ValuStrat said that the downward trend resulted in 31.1% citywide capital value loss since the peaks of mid-2014. All established freehold locations monitored by the ValuStrat Price Index (VPI) witnessed price drops since the last quarter, ranging from 1.8% to 4.5%.

The VPI stated that, on an annual basis, 3 out of 26 locations were more resilient to downward pressure and saw single-digit declines – villas in Palm Jumeirah and Emirates Hills, as well as apartments in Dubai Sports City, stated VPI, which is a valuation-based price index for Dubai’s residential capital values.

Capital values dropped by more than 15% annually for apartments in Discovery Gardens and Dubai Production City, it added.

“Residential capital values per sqft approached 2012 levels prompting 40% annual rise in off-plan sales and 34% growth in ready home sales. Additionally, more than half of residential sales were for apartments priced less than Dh1 million and villas priced less than Dh2 million,” said Haider Tuaima, the head of Real Estate Research at ValuStrat.

The Dubai VPI analyses residential rental values. The rental VPI is a 100 index with a base set for Q1 2014, it monitors 16 apartment and 10 villa locations within Dubai’s freehold market and compares similar units within those locations on a quarterly basis.

The Q3 2019 residential rental VPI in Dubai stood at 72.6 points, declining 27.4% since 2014, softening 1.7% quarterly and 7.9% annually. Dubai’s net yields averaged 5.9%, with apartments at 6% and villas at 4.8%. The average residential occupancy rate stood at 86%.

As far as residential supply is concerned, 12,948 residential units, 37% of the total estimated supply for 2019, have been completed so far. More than half of these completions were concentrated in four areas: Dubailand, Jumeirah Village Circle, Dubai Marina and Dubai Silicon Oasis.

For the remainder of the year, projected supply mix is composed of 72% apartments (16,000 units) and 28% villas (6,200 units), all expected to finish construction before year-end.

“With improved transaction volumes in recent months, it will be interesting to see what buyer demand developers find at this week’s Cityscape Global event in Dubai – and if this trend continues over the remainder of the year,” remarked Declan King MRICS – MD & Group Head Real Estate ValuStrat.

Dubai’s office capital values dipped 2.5% since last quarter to 67.6 VPI (ValuStrat Price Index) points, this translates to capital values being 32.4% lower than the same period during the index base year 2015, and 16.3% lower than the same period last year.

Office space in Jumeirah Lake Towers witnessed the highest annual drop of 19.3% and 3.8% QoQ, this is followed by Business Bay with declines of 14.7% annually and 1.3% quarterly. Dubai International Financial Centre (DIFC) demonstrated relative resilience to the overall citywide downward trend, as capital values softened annually by 5.3%.

Construction of an estimated 86,141 sqm (927,213 sqft) Office GLA (Gross Leasable Area) was completed so far. Available data on remaining office space under construction is estimated at 395,207 sq m (4.3 million sq ft) GLA, expected for delivery in 2019, said the VPI.

Median office asking rents declined by 2.4% YoY and fell 2.1% QoQ. The citywide median asking rent for a typical office size stood at Dh926 per sqm (Dh86 per sqft). Office occupancy in Dubai is estimated at 84%.

As of July, total hotel rooms and hotel apartments stock stood at 93,767 rooms and 24,442 keys, respectively.

Total international guests Jan-July 2019 reached 9.58 million, up 3.6% when compared to the same period last year.

Citywide occupancy rate for the same period stood at 74%, dipped 2% YoY. Revenue per Available Room (RevPAR) and Average Daily Rate (ADR) witnessed double-digit declines on annual basis, plunged 13.5% and 11.3%, respectively.

Most industrial property prices remained stable QoQ ranging between Dh1,507 to 3,121 per sq m (Dh140 to 290 per sq ft) in established industrial areas with buildings of good quality and specification priced at the higher range.

And rental rates saw marginal declines as asking rates quoted generally ranged between Dh200 per sq m to Dh550 per sq m (Dh19 to 51 per sq ft) depending on various factors such as location, size, condition and age of the building.

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