Dubai property prices and rents continue to decline in the third quarter of 2014. Real estate industry professionals began acknowledging this fact by the end of April, but only in July it became clear that the developing tendency will not be short term. The recently released Asteco’s Q3 2014 report echoes similar observations.
The report states that both sales prices and rents have witnessed a fall in the third quarter of this year, after a ten-quarter rise. Apartment and villa prices in many communities in Dubai have dropped by an average of 2% and 3%, the report says, but in reality this numbers may look more like 20% or 30% in some areas of the city.
The developing tendency is caused by the continuous supply of new units. However, this is not the only factor affecting the market. Geopolitical risks and tightened real estate transaction regulations scare investors away. On the other hand, Dubai rents have already reached higher levels than the rents in global megapolises such as London and New York despite the relatively young age of the open real estate market.
Apartment rents in Jumeirah Village and Dubai Marina saw a modest decrease of 2% during Q3 2014, Asteco’s report say. As a result average rents for 1-bedroom apartment in Jumeirah Village is now estimated at AED 60,000 to AED 80,000. In Dubai Marina, on the other hand, 1-bedroom apartment rents go between AED 90,000 – AED 120,000 according to Asteco, but you can also find approximately 20% lower rents according to other real estate agents. Traffic congestion and the ongoing construction works in the community are the main reasons for the decline.
Apartment rents in areas Discovery Gardens and International City, which are generally known as more affordable communities, have registered an impressive dip 7% for a period of barely three months. As a result, the rent of a 1-bedroom apartment in International City is now between AED 44,000 and 48,000, whereas in Discovery Gardens it is AED 60,000 to AED 72,000. Again, this figures are released by Asteco and other agencies may offer different figures.
Apartment sales rates in Dubai Marina, which is the most active area in Dubai, also registered a fall during the third quarter of the year. Together with Jumeirah Islands and Victory Heights, apartment sales prices in Dubai Marina each witnessed the greatest decline of 8% each. For some buildings the decline in prices may reach up to approximately 20%.
The Springs saw the steepest fall in villa rents in Dubai during Q3 2014. According to Asteco’s report, villa rents in the community dropped by 8% between July and September this year. By the end of September, rents in The Springs have reached levels of AED 180,000 to AED 205,000 for a 3-bedroom villa. Still, this rents are very high from international perspective having in to consideration that the properties are already 10 years old and the condition of the communal areas is deteriorating.
Villa rents in Mirdif and Arabian Ranches dropped by 5% each to AED 170,000 – AED 260,000 and AED 115,000 – AED 155,000. A 4% decline was witnessed in villa rent rates in Jumeirah Village, pushing prices down to AED 145,000 and AED 180,000. Other areas, like Palm Jumeirah, Green Community and Jumeirah saw a fall in villa rents of 3%.
However, it is Dubai’s luxury villa market that scored one of the most impressive sales price declines. For example, the prices of villas located in Arabian Ranches fell by 6%, hitting AED 850 – AED 1,450 per sq. ft.
Despite that facts, the report adds that the year-on-year rental growth in Dubai is still rather high. Dubai property prices are likely to register a bigger decline as the market is expected to welcome more and more new supply.