Below is an extract from JLL Q3 2017 Dubai Real Estate market. While momentum is still very strong, the risk of over supply is significant with expectations of sales price of both Apartments and Villas to drop by 1% and 2% respectively. Rents will drop more aggressively with an outlook of 6-7% drop in the next 12 months. Marina and Downtown have the highest demand with almost 40% of the sales in August 2017.
Cityscape Global reflects improved market sentiment
Cityscape remains a good barometer of sentiment towards the Dubai real estate market. The 2017 edition saw increased market activity on the back of stronger sentiment, with several developers reporting strong sales within newly launched projects. The dangers of a potential over-supply on the back of sales achieved from more attractive payment terms is however increasing. Generous payment terms and guaranteed rent periods, although attractive to investors, could result in a future ‘real estate bubble’. One of the most significant announcements at Cityscape 2017 was District 2020, a master planned development of residential and commercial space on the site of Expo 2020. This project forms an important component of the planned long-term legacy from Dubai hosting Expo 2020. Alternative real estate asset classes were another area of focus at Cityscape, with specific emphasis
on the healthcare sector. With theMENA region lagging behind other developed economies in terms of spending per capita on healthcare and the provision of hospital beds, there are significant opportunities for real estate players to tap into this sector over the next five years. Dubai is investing heavily in the infrastructure needed to host multiple healthcare institutions, most notably through Dubai Healthcare City, a healthcare freezone offering benefits to both local and international operators. The Dubai Health Authority (DHA) is also striving to ensure the city has the medical infrastructure required to attract an increased share of the growing global market in medical tourism.
Residential Real Estate Summary
Momentum for residential developments is strong, leading to dangers of potential over supply.
A number of developers launched new mega residential projects at Cityscape Global that was held in Dubai during September 2017. Large-scale developers such as Nakheel and Deyaar announced projects worth AED 3.2 billion and AED 1.0 billion respectively. Direct sales of UAE properties were allowed at Cityscape for the first time in ten years and this peaked the interest of potential buyers by allowing them to compare between the various launch offers across a variety of properties. This renewed sentiment does however raise the prospect of a potential over-supply on the back of sales achieved through more attractive payment terms.
Sale prices for both villas and apartments remained stable over Q3, while rents continued their low single-digit declines. Anecdotal evidence suggests that numerous residential buildings (even within prime areas) are seeing increased vacancies, thus, tenants have been able to renegotiate their rents downwards by 5% – 7% on average.
In terms of sales, Azizi development was particularly active during Cityscape, reporting headline sales of AED 1.3 billion, reflecting the attractive payment terms on offer. The company reported that the first phase of its Riviera waterfront project in Meydan was completely sold out during the exhibition, with handover currently scheduled for late 2018. The total value of transactions of existing residential properties (excluding land) also increased over 2017, with sales at YT August exceeding AED 13.7 billion, up 28% Y-o-Y. A total of AED 2.7 billion of unit sales was recorded in August alone, with 20% of this total occurring in Dubai Marina and another 20% in Downtown. Although numerous developments have been launched throughout the city, these prime areas will continue to attract investors, given their better accessibility and more extensive range of supporting facilities.