Off-plan transactions up 60% in 2017 - Chestertons reports
• Dubailand, Business Bay, and Al Furjan lead off-plan residential transactions in Q4, as total demand for off-plan property increases 60% in 2017
• Apartment and villa sales prices down 2% and 6%, respectively, in Q4 2017, while rental rates for apartments and villas down 3% compared to Q3
Off-plan real estate transactions in Dubai increased 60% in 2017 compared to 2016, according to the latest Observer: Dubai Q4 2017 Report from leading international property company, Chestertons MENA.
The figures follow a steep increase in the volume and value of off-plan transactions in the second half of the year, with Dubailand, Business Bay, and Al Furjan seeing the highest demand, compared to the Lagoons, Downtown Dubai, and Business Bay, which achieved the highest values.
“In terms of residential property transactions, off-plan dominated the market throughout 2017. Going forward, we expect the off-plan market to decrease as the addition of new supply would suggest it will be ready units that will see an increase in demand,” said Ivana Gazivoda Vucinic, Head of Consulting and Valuations and Advisory Operations, Chestertons MENA..
From a transaction value perspective, The Lagoons achieved values of almost AED 800 million, closely followed by Downtown Dubai with AED 780 million and Business Bay with AED 759 million.
In comparison, Dubai Marina dominated the completed units market along with International City and Emirates Living. Dubai Marina and Emirates Living also took the lead for transaction value, both reaching AED 800 million, followed by Downtown Dubai with AED 450 million.
In the rental market, apartments and villas witnessed a 3% drop. The introduction of new stock, by way of delayed 2015 and 2016 projects, and the addition of attractive letting incentives such as rent-free periods and multiple cheques, encouraged tenants to seek better deals. While this was good news for tenants, it increased downward pressure on rents in most communities for landlords.
Despite the increased demand for smaller units due to their relative affordability, rents for studios and one-bedroom units fell across all communities by 2% compared to Q3. Rents in Dubai Sports City recorded the steepest decline at 7% whereas there was no change in rents for apartments in JVC.
“The softening of rents is expected to continue during 2018 as tenants pressure landlords to offer more preferential leasing terms. Additionally, other factors such as new stock entering the upper and mid-prime residential segments, coupled with the flat economic sentiment, will also exert downward pressure on Dubai’s rents,” added Vucinic.
In terms of villas, all communities experienced falling rents with the exception of The Springs, which continues to be popular as an established community with a wealth of amenities. Arabian Ranches witnessed a precipitous drop in rents during Q4 2017 compared to Q3 with rents down an average 9% due to additional stock and residents downsizing. In contrast, rents remained unchanged in Jumeirah Islands while they increased by 1% in The Springs.
Overall sales prices for apartments and villas in Dubai weakened by 2% and 6%, respectively, compared to Q3. Softening demand due to economic uncertainty, combined with excess supply of residential units, brought further correction. However, the volume of ready units transacted increased Q-o-Q by 2,839.
Apartment prices in The Greens saw the steepest correction, down 12% due to now coming more in line with decreases seen elsewhere, while prices remained robust in Dubai Sports City, The Views, and JVC owing to their relative affordability. On the other hand, prices across all villa communities except The Springs registered a decrease.
“Dubai’s residential prices and rents are projected to face further correction in 2018. Buyers can expect more incentives from developers for off plan projects due to the increased competition and greater affordability of the ready units. Additionally, short-term demand is expected to be buoyed as Expo2020 draws closer,” commented Vucinic.
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