Dubai property market direction depends on supply, says JLL
Firm says prices could rise by 5% this year so long as deliveries kept in check
The next direction Dubai’s residential property market takes depends on how much of the stock developers have in their current pipeline is actually delivered, according to a new report by JLL.
The property specialist said that Dubai’s residential market is "stabilising", with apartments declining in price by just 0.3 per cent over the past 12 months, while villa prices fell by just 0.8 per cent.
It is forecasting an increase in prices over the next 12 months on the basis that although prices are flat, underlying sales activity is increasing.
Craig Plumb, the head of research for JLL Mena, said that sales of completed homes have increased by 24 per cent in the first five months of this year.
“If you look at off-plan, that has gone up even more. It’s gone up by 70 per cent,” he added.
“When you get more sales, it suggests that prices will go up within the next year.”
Mr Plumb is forecasting a “fairly modest” increase in house price sales in Dubai of up to 5 per cent in the second half of 2017, but added that this was dependent on how many new homes are delivered.
JLL said that that 78,000 new homes are due to complete by 2020, based on developer estimates. This is a 15 per cent increase on historic forecasts. Given that population growth is predicted to be 3.5 per cent year-on-year, there would be an oversupply if forecast supply comes to market.
However, the firm said that it expects the materialisation rate (the number of homes that are actually delivered, as opposed to developers’ targeted completions) to be around 40 per cent, which would dampen supply.
JLL had predicted an upturn in the property market early last year after a period of price stabilisation, but a number of subsequent events such as Brexit and a sustained high US dollar value (to which the dirham is pegged) caused greater market uncertainty.
Meanwhile, a report published by propertyfinder stated that sales prices fell in 17 out of 23 districts across Dubai in the six months to March 2017, while rental values fell in 21 markets.
Prices fell most sharply (by 6.7 per cent) in Downtown Dubai, which remains the most expensive district. Prices also fell by 3.5 per cent in Dubailand and 3.6 per cent in International Media Production Zone.
Writing in the report, Kalpesh Sampath, the chief operating officer of property broker SPF Realty, warned that developers had been “ramping up launches of their off-plan projects in the last six months with no stop in sight”.
“Even real estate agencies working almost entirely on off-plan projects have raised concern that there is an overload of new project launches,” Mr Sampath said.
“Developers are locking in the money, but in the long run the situation may turn on its head as increasing supply may outstrip demand, and lead to a lull in interest, or a slump in pricing trends.”
Updated: July 5, 2017 04:55 PM