As 2018 draws to an end, we take a look back at what Q3 had to offer. Compared to Q1 and Q2, this last quarter followed similar patterns as the previous ones with prices for both rentals and sales declining in landmark areas. Even with nearly 40 projects nearing handover within the year, Q3 didn't see any significant changes and maintained the same downward trends as the first two quarters.
According to well-known property developers, there is a steady decline of at least 3 to 5% on both sales and rental rates on apartments, villas, and even office spaces. Due to the decline of rental prices, tenants and residents are looking for larger units in better localities.
With the rising competition of other projects, landlords are introducing better rates and more cheques for rental units. Whereas, project developers are providing better payment plans and benefits for sales units.
The rental prices of apartments have shown a steady decline with some units in Deira falling down to 8.3%. According to property portals, Dubai Sports City, Al Nahda, JLT and other areas saw a maintained rental rate. It is no surprise that Dubai Marina remains as the most popular area for renters.
Buyers were satisfied with this quarter’s prices as prices continued to fall for several key projects. Units in International City fell by 8.2% however, we saw a slight rise in studio prices in JVC. Dubai Marina still remains a favorite for buyers, where a unit in this area could cost you an average of up to AED 2.2 million.
Al Nahda and Deira were the 2nd and 3rd most popular areas for rental apartments. Whereas, in terms of sales transactions Downtown Dubai, Dubai Marina and International City were the most transacted areas.
Rental costs for villas were also affected in most areas, except for places like Mirdif where prices remained the same as previous quarters. The lower rental rates have given tenants the much-needed advantage of renting larger and more spacious villas for their families. Mirdif, Arabian Ranches, and Jumeirah prove to be the most popular choices for tenants and residents because of the reduced prices and incredible locations. Some units in Dubailand and Jumeirah Park even saw a rise in rental rates. However, rental villas in Al Barsha saw a price decline of at least 8.5% in Q3.
Arabian Ranches was the top choice for buyers whereas, Palm Jumeirah and Dubailand came in 2nd and 3rd amongst the most popular villa communities. A quarter-on-quarter analysis reveals that villa sale prices fell to around 4 to 5% in some areas. However, in areas like Dubailand, the average sale price of a villa went up from 2.35 to 2.5 million. The reason for price changes can be due to the finished status of several projects which are also ready for handover.
According to DLD, Dubai developers managed to produce almost 40 projects that are ready for handover by the end of 2018. Several projects have started delivering like Akoya by Damac, Arjan, Dubai Water Canal, and many more. Mohammad Bin Rashid City is still one of the most popular searches among new buyers. Around 3,850 apartments were completed, and 570 total villa units were completed in the 3rd quarter of 2018.
Offices and Retail
No new units in Offices and Retail were established; however, there was a 5% decline when it came to office rental rates from Q2 2018 and a 9% decline on a year-on-year basis. Areas like Sheikh Zayed Road, Business Bay, DIFC still prove as the most popular areas for offices and retail space.
Top choices for business owners include; Barsha Heights, Business Bay, DIFC, and Jumeirah Lakes Towers. An office unit in Barsha Heights ranges from AED 600 to AED 1,050 per sq. ft. Compared to the previous quarter, there was a 4% decline in sales and a 13% decline on a year-on-year basis.
Prices in Dubai have reached a tipping point. Private developers will find it very difficult to develop new projects and thus new supply will be restricted. In many areas of Dubai, it is more efficient for real estate players and private developers to buy ready assets than develop a new one, with replacement values edging closer to the intrinsic value of such assets today.
With massive initiatives launched by H.H Sheikh Mohammed Bin Rashid Al Maktoum, Vice President of UAE and Ruler of Dubai, to encourage the private sector and add to the growth of the City.
In addition, relaxing the mortgage cap will add further encouragement to property tenants to make a buying decision in this market.
Finally, we are seeing a growing trend of new demographics starting to invest in Dubai in a big way. A major example of this is the Chinese buyers and investors.
The above factors all provide reason to cheer for the future of the Dubai market. Whether we will start to see the changes in Q4 or next year, it is coming.