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Home prices flatline in Abu Dhabi and Dubai with slowdown expected to continue in 2015

Monday, 26 January 2015

House prices in Dubai and Abu Dhabi flatlined during the final quarter of 2014, studies showed yesterday.

Abu DhabiReports from both JLL and MPM Properties, the real estate consultancy arm of Abu Dhabi Islamic Bank, revealed that house prices in the two cities did not rise at all in the three months to the end of December.

Average villa prices in Dubai dipped by 1 per cent during the final three months of 2014, according to the property agent JLL as the emirate’s real estate market slowed considerably in the final quarter.

Dubai apartment prices also showed zero per cent growth between October and December 2014, JLL said, as buyers continued to suffer from the introduction of mortgage caps by the Central Bank and a hike in transfer fees.

Nonetheless, using data from the information company Reidin, JLL reported that villa sales in Dubai had recorded average increases of 12 per cent during the whole of 2014 and apartment sales had increased by 23 per cent.

JLL reported that most of the growth was achieved during the first half of the year, when Dubai was still in the grip of a house price boom.

Similarly, JLL reported that both villa and apartment rents remained flat during the final quarter of 2014 as the market stabilised during the final part of the year.

In total though, apartment rents in Dubai rose by an average of 18 per cent during the year and villa rents rose 5 per cent with most of the increase again achieved during the first six months of 2014.

dubai burj khalifa

The news comes as Dubai Land Department reported that the total volume of real estate deals fell 15 per cent in 2014 compared with the previous year.

And, with oil prices falling and more new homes due to be completed in the emirate over the coming year, JLL said that it expected the housing slowdown to continue.

“The residential sector is likely to remain subdued over the next 12 months as the market is expected to absorb 25,000 additional units in 2015,” said Craig Plumb, the head of research at JLL’s Dubai office. “But in reality, we remain cautious of the delivery of some of these projects within the time frame.”

In Abu Dhabi it was a similar picture. According to MPM Properties, average house prices remained flat during the final quarter of the year.

MPM said that according to its research, sales volumes during November and December 2014 were at a 20-month low, owing to the introduction of mortgage caps.

Meanwhile,  rents in the capital had not risen as quickly as prices, but the market was becoming more fragmented.

“The Abu Dhabi market continues to be dominated by individual investors, with sale prices increasing faster than rents, eroding yields which have dampened investor demand,” said Paul Maisfield, the MPM chief executive.

“This trend will continue until sellers agree to lower prices or rents rise to help investors achieve net yields within a range of 5.5 per cent - 6 per cent.”

The current market is effectively a three-tier market, he said. “The mid-tier properties, which takes up most of our portfolio, are seeing a stability in rents with an average 5 per cent increase, reflecting the fact there is a ready supply of such properties and thus landlords are mindful not to push rents too high and risk occupancy levels falling.”

“At the top end of the residential market there is a shortage in supply, and occupancy levels are high within the most popular developments and communities, and with the limited choice tenants now have rental increases of 15 to 20 per cent are common at lease renewal,” he added.

“At the bottom end of the market with the older properties there is also a shortage of supply which is pushing up rents and in percentage terms these have been hit the hardest.”