The total number of off-plan transactions in the third quarter of 2017 has increased by 86% from the previous quarter, according to Chestertons MENA. The value of off plan transactions was up by 118% to AED4.04 billion.
“With reference to off-plan transactions, Dubai’s real estate market has witnessed seasonal peaks and troughs in the last year due to high levels of uncertainty. After a promising start to 2017, sales plummeted during a disappointing Q2 however they have picked up positive momentum in Q3,” said Ivana Gazivoda Vucinic, Head of Advisory and Research, Chestertons MENA.
- Read more: Buying Property Off-Plan in Dubai
The most transacted area in Dubai was Dubai South with a total of 1,151 transactions, closely followed by Downtown Dubai with 821 transactions and Business Bay with 686. The total value of off-plan sales in Q3 was AED4.04 billion with Downtown commanding 50% of the overall value.
Consequently, the increased interest in off-plan units had a continued negative impact on completed units where an 11% decrease in transaction volumes and a 19% in values was witnessed.
“In Q4 we expect to see further corrections of sales prices and rents. A slight pickup of completed unit transactions is expected, this will however have a negative impact on off-plan sales transactions which we expect to decline and then stabilise,” said Vucinic.
Overall, apartment sales prices have continued to decline during the third quarter of 2017 witnessing a drop of 2%, thus prolonging the downward trend witnessed during the Summer. This could potentially trigger further declines in completed unit values, as investors shift more and more towards off-plan property opportunities offering convenient payment options such as five-year post-handover or 1% payment per month.
Interestingly, prices varied significantly from community to community within the apartment market with Dubai Silicon Oasis declining 9% to AED829 per sqft whereas The Greens actually witnessed growth of 13% to AED1,352 per sqft, by far the best performing area in Q3. Dubai Marina was the only other location to witness an increase of 2%, average sales prices in the area are now AED1,470 per sqft.
Apartment rental values fell further in the third quarter after additional stock entered the market leading to a 3% decline. Discovery Gardens, Dubai Marina and Jumeirah Village Circle, on average, witnessed declines of 5%. In was only The Greens that once again remained on par with the previous quarter.
“We have seen a 2% decline for studios and a 3% decline for one, two, three-bedroom apartment units. Studios have been relatively resilient this year and performed better throughout the year when compared to larger apartments, the same is true of the villa market. Two and three-bedroom villas are performing better than larger configurations,” added Vucinic.
Villa sales prices have been more resilient due to the higher level of corrections during the previous quarters. The Meadows and Springs were the worst affected areas, both recording a 7% decline.
Villa prices in Arabian Ranches fell by 3% to AED1,010 per sqft. Palm Jumeriah prices are currently averaging AED2,534 sq ft; Jumeriah Park AED1,136 per sqft; The Lakes AED1,348 per sq ft The Meadows and Springs AED1039 per sqft; and Victory Heights AED1,105 per sqft.
In the villa rental market three-bedroom units witnessed a modest 4% increase during Q3, while other sized units declined by 2% (two bedrooms), 3% (four bedrooms), and 1% (five bedrooms).
“To stimulate demand, we are increasingly seeing landlords now offering more favorable rental plans, these include up to 12 cheques and even rent-free periods as an incentive to lease properties,” commented Vucinic.