Dubai’s property market is still in the doldrums, years after prices and rents started to drop.
Estate agents suggest the downward spiral is likely to bottom out over the next few months.
International property firm Cluttons, who have offices in Dubai, reckon house prices fell by 7.8% during the past year, but point out the rate of decrease is slowing.
Another internal property consultant, Chestertons MENA, disclosed transactions in Q1 2017 rose by 25% compared with the previous three months.
The increase coincided with a surge in the purchase of off-plan homes, with sales figures up 45%.
“The increase was boosted by incentives and payment plans created by developers to make it more financially amenable for investors to purchase property,” said head of research Ivana Gazivoda Vucinic.
False dawn for market
Meanwhile, consultants Phidar Advisory are also warning that signs of more sales are a false dawn for the market.
Managing director Jesse Downs claims sales may be up almost 10%, but falling rents and stagnant yields are holding the market back.
Rents are down around 2.5% in Q2 from Q1 2017, a report from the firm revealed.
Apartment gross yields are also falling – by 0.15% to 7.6%.
Some yields for villas are increasing, but the firm suggests this is only because property prices are falling and distorting the analysis.
“Until we see a recovery in business and the jobs market, there seems to be little justification to call a recovery,” said Downs.
“Oil prices are still low, the US dollar is still high and probably going to increase in strength.
“We expect one or two more interest rate hikes. It might not increase significantly but it’s most likely going to stay strong, and the cost of debt is increasing.”
Downs explained rents for villas have fallen 2.9% in Q2, while sale prices were down 5.6%, which pushed yields up to 4.5%.
“After eroding through the end of last year, villa yields have started to expand and now apartments need to go through a similar correction,” she said.
“Rents continue to decline due to weak demand and changes in housing budgets, which will have the starkest impact on high income housing.”