Taylor Scott International News
Dubai's residential property bubble is deflating and average prices will remain the same or fall by up to 10% during 2015, a new study suggests. According to international real estate firm JLL, prices and rental rates have grown to an unsustainable rate over the last two years. JLL head of research for the Middle East and North Africa (MENA), Craig Plumb, said that a period of stability will be good for the market. There have been concerns voiced that lower oil prices could have an impact on the emirate’s property markets but JLL points out that Dubai is less vulnerable to lower oil revenue than other Gulf Cooperation Council (GCC) oil exporters, due to its diverse economy and growth in non-oil sectors. Overall, the second half of 2014 saw Dubai’s residential market stabilise as average rents and sale prices remained relatively flat, with marginal declines over the last quarter. On an annual basis, the REIDIN rental index shows growth levels dropping from 18% in 2013 to 15% in 2014. Similarly, the sales market saw some cooling down as the REIDIN sales index points to a decline in growth levels from 23% in 2013 to 20% in 2014. This comes as the number and value of transactions dropped 30% & 14% respectively in 2014, according to data from the Land Department. JLL predicts that the residential sector is likely to remain subdued over the next 12 months as the market is expected to absorb 25,000 additional units in 2015. ‘In reality, we remain cautious of the delivery of some of these projects within the timeframe,’ the firm says. It also points out that as Dubai’s economy continues to expand and job creation grows, demand for affordable housing is expected to increase over the next 12 months. This comes as a proposal to ensure the availability of affordable housing for the middle-income segment of the market is currently under review. ‘These efforts aim to create a balance between the supply of luxury and affordable housing units that cater to all residents in the Emirate, as many were previously priced out of the market during the 2013/2014 price rally,’ the JLL market overview report says. It also shows that in 2014 the supply of units in Dubai increased to 377,000, up from 342,000 in 2011 and the firm predicts that 25,000 residential units will be added in 2015, some 13,000 in 2016 and 12,000 in 2017. ‘While lower oil prices are likely to dampen investment sentiment in the short term, Dubai’s success at diversifying its economy and expanding its global reach makes it less vulnerable to oil price fluctuations,’ the report explains. ‘The next 12 months are expected to see a boost in business activity, highlighted by the government’s 2015 budget announcement which saw planned spending and revenues increase 9% and 11% respectively. However as government charges increase further in 2015, we remain wary of pressures on the cost of living as inflation registered 4% at the… Taylor Scott International
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