Broker CBRE said average house prices in Dubai fell by a further 4 per cent in the final quarter of 2015 meaning that apartment sales were 16 per cent cheaper than a year ago.
About 6,000 new homes sitting empty in Dubai amid poor property market conditions
Nearly a third of all the homes expected to be completed in Dubai this year are sitting empty, brokers say.
Poor market conditions and construction delays have been blamed for the situation as brokers slashed their estimates for completions.
According to the property broker CBRE, about 6,000 homes in areas such as Sports City and Dubailand have been largely completed but have not yet been handed over to buyers.
CBRE said the delay in handovers meant that it has had to revise down its forecast, made at the start of the year, for the number of new homes to be completed in the city this year from 20,000 to 14,000.
“The amount of supply has been below expectations,” said Matthew Green, the head of research at CBRE’s Dubai office.
“We believe that in some instances this could be the result of construction delays but in the majority of cases developers are demonstrating a certain amount of flexibility to wait until they see a likelihood of better returns so they can deliver into what they perceive to be a rising market.”
CBRE estimates future housing supply in the city each year by listing all of the property developments due to be completed in the city and then visiting each site to see how construction is progressing.
Earlier this year, Ziad El Chaar, the managing director of Damac Properties, accused property brokerages in Dubai of “professional malpractice” by publishing Dubai market reports forecasting excess supply, which “have a detrimental effect on the generally positive sentiment in the market”.
He did not specify which brokerages he was referring to.
CBRE said that much of the supply that was delivered this year came from other Dubai developers including Nakheel and Tecom, as well as other smaller developers, and were located in areas such as Jumeirah Village Circle, International Media Production Zone and Dubai Investment Park.
CBRE predicted that a further 48,000 homes would be completed in Dubai over the coming three years, although it added that such forecasts were subject to further “slippage”.
The broker said that average house prices in Dubai fell by a further 4 per cent in the final quarter of this year, meaning that apartments were 16 per cent cheaper than a year ago and villa prices were 14 per cent cheaper.
Underestimating handovers has also had an effect on predictions for the rental market, which has also performed better than expected.
It said that average rents for Dubai apartments remained flat from a year ago while rents for villas were down 4 per cent.
“With the actual delivery of units falling short of anticipated supply levels, the occupier market has held up comparatively well, particularly for more affordable locations such as Jumeirah Village Circle, Dubai Sports City and Dubailand Residences, which all achieved rental growth. As has been the trend, prime areas such as the Palm Jumeirah, Dubai Marina and Downtown Dubai continued to see rental deflation with rates falling between 1 and 3 per cent during the quarter.”
Mr Green predicted that average house prices in Dubai would fall by another 10 per cent next year, while rents would decline in some “prime areas”.
He said: “Normally at this point in the cycle we would expect to see a flight to quality to take over in the residential sector, but we haven’t seen enough declines to get to that point, so we’re still really in that phase of a flight to affordability.”