Downward pressure on real estate rates as units come to market
- Residential rental growth rates slowed from 27 per cent to 3 per cent year-on-year, up to the first quarter of 2015, according to US CBRE.
- The value of total residential sales rose by 40.5 per cent, but average sales rates fell by 2 per cent
- Commercial rental rates also slowed to 3 per cent in the year ending the first quarter 2015
Annual residential rental growth slowed from 27 per cent in the year ending the first quarter of 2014 to 3 per cent in the year ending the first quarter of 2015, according to a report published by US-based real estate giant CBRE.
Rental rates were stable in the first quarter of 2015, showing that the influx of 16,000 units in new stock has been absorbed by the market, the report continues.
Residential sales transactions also dropped in value by 20 per cent year on year, with transactions dropping by 4 per cent.
However, the value of residential sales transaction rose 40.5 per cent between the fourth quarter of 2014 and the first quarter of 2015, from AED4.6bn ($1.3bn) to AED6.4bn. But the number of transactions also rose from 2,573 to 3,896, meaning average sales rates declined by 2 per cent, according to the report.
Dubai Marina and Jumeirah Beach Residence saw the most transactions, with 512 deals in first quarter of 2015, while Palm Jumeirah was the highest value, with the average transaction worth AED5.6m.
The delivery of a large quantity of new units in 2015 will continue to depress market rates.
In the commercial sector, demand stayed strong and rates were stabilised by the delivery of 420,000 square metres of new office space, bringing total stock in the first quarter of 2015 to 8.1 million sq m, continues the CBRE report.
Rental rates stayed steady over the quarter at AED1,885 ($514)/sq m/year, but show a 3 per cent year-on-year rise, significantly less than the almost 30 per cent rise in the year leading up to the end of the first quarter 2014.
Lower oil prices have not yet affected Dubais commercial real estate market thanks to its economic diversity, but could in future. Regional instability and global economic conditions are also a concern.
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