Despite a quarterly rise in property sales during the third quarter, Dubai’s real estate market is expected to face further challenges in both the rental and sales market, according to leading international property consultancy firm Chestertons.
There had been increased sales activity in the third quarter, which rose by 50% Q-on-Q, largely attributed to pent up demand from Q2, along with developer promotions offered to clear built but unsold inventory, stated Chestertons in its latest Observer: Dubai Residential Report Q3 2020. Total transaction volume was down 21.7% from Q3 2019, it added.
Apartment prices fell 3.4% Q-on-Q, an increased rate of decline from the previous quarter, while villa sales prices witnessed a marginal fall of just 0.2%, said Chestertons in its report.
In the rental market, apartment rental rates fell by 3.6%, whereas villas saw declines of 1.2%, it stated.
Chris Hobden, Head of Strategic Consultancy, Chestertons Mena, said: "Dubai witnessed a clear increase in transactional activity during the third quarter, building on a recovery seen during the final month of Q2, following the easing of Covid-19 restrictions."
"However, transaction volumes remain lower annually, and we expect both prices and rents to face further downward pressure over the final quarter of 2020. The ongoing economic impact of Covid-19, and a likely reduction in the emirate's population, both key drivers of Dubai residential prices, are set to hamper market performance," noted Hobden.
In the sales market, average apartment prices fell by 3.4% from Q2 2020, denoting a 11.4% year-on-year decline.
"The largest price declines were witnessed in Dubai Sports City, with average prices falling by 5.5% Q-on-Q to AED 621 per sqft. Dubai Silicon Oasis was the only other location to see a quarterly fall in average prices above 5%, reaching AED 540 per sqft, representing a 5.3% drop," he added.
Locations witnessing more moderate declines in Q3 included popular communities such as Dubai Marina and The Greens, with prices falling by just 2.4% and 2.5% to AED 985 per sqft and AED 815 per sqft, respectively.
Average apartment prices in The Views and Business Bay also performed comparatively well, both declining by 2.7% to AED1,022 per sqft and AED970 per sqft, respectively, over the third quarter.
Villa sales prices saw a more moderate fall of just 0.2% and, on an annual basis, prices fell by 5.8%, with villa prices proving more resilient for the second consecutive quarter.
Palm Jumeriah was the only location to witness a price increase, up by 2.2% from AED1,820 per sqft to AED1,860 per sqft while Jumeirah Park saw prices hold steady over Q3, at AED 720 per sq ft, having seen a modest decline of 0.7% the previous quarter.
Arabian Ranches and The Lakes both witnessed quarterly declines of less than 1%, at 0.4%, and 0.5%, to AED 787 per sqft and AED 975 per sqft, respectively.
The Meadows/The Springs saw the highest quarterly decline at 2.5%, with average prices reaching AED 795 per sqft, down from AED 815 per sqft in Q2.
“Average villa prices performed comparatively well over the third quarter, with the pace of decline tapered by broader price stability across several locations and, in the case of Palm Jumeirah, an uptick in the average achieved sales price,” said Hobden.
In Dubai’s rental market, apartment rates declined by 3.6% in Q3, with all areas once again showing falls in average rental rates, with Covid-19’s economic impact a determining factor. International City and Discovery Gardens witnessed the sharpest quarterly rental decreases of 5.8% and 5.5%, respectively.
Villa rents proved more resilient, falling by just 1.2% and 5.6% on a quarterly and annual basis, respectively, with agents reporting an apparent uptick in villa enquiries since the easing of lockdown restrictions in May.
Jumeirah Village Triangle (JVT), Jumeirah Islands, Jumeirah Golf Estates, and Palm Jumeirah all saw declines of below 1%, with Arabian Ranches also seeing a comparatively moderate fall of 1.3% q-o-q.
On a unit-type basis, five-bedroom villas at The Lakes saw the sharpest quarterly drop, falling to AED 280,000 per annum from AED 290,000 in Q2, a decline of 3.4%. Conversely, three-bedroom villas at The Lakes and JVT held steady over Q3, as did four-bedroom units at JVT, Palm Jumeirah, and Jumeirah Islands.
In terms of transactions, completed property sales totalled 4,587 units in Q3, compared to 1,902 over the second quarter, and a more moderate rise from the 4,084 units transferred in Q3 2019. Off-plan sales totalled 3,262 units over Q3, down from 3,331 the previous quarter and the 5,943 units sold over Q3 2019.-TradeArabia News Service