Dubai property prices are forecast to continue falling this year as the market absorbs additional supply, according to a new report by consultants JLL.
JLL’s 2017 Year in Review report said occupancy levels in Dubai would follow a similar trend in 2018 as supply growth outpaces potential demand.
JLL said both sales prices and rents declined over the past year, but the rate of decline slowed down over the fourth quarter of the year – an average of 1.6 percent across all real estate segments.
The report said recent activity in the market suggests that confidence has returned to both investors and developers, although the number of new launches are significantly below their peak levels in 2006/2007 and the volume and the value of sales are also below levels recorded during 2013/2014.
It said the majority of sales in the residential sector in 2017 have been concentrated in the off plan sector, where developers have been offering particularly attractive prices and payment plans.
A total of 25,600 off plan properties were purchased in Dubai in 2017, with last year set to record the highest level of off plan sales in Dubai since 2008.
JLL noted that the UAE’s real estate sector continued to adjust to lower growth being the “new normal”.
One of the major drivers of the more subdued market has been the slowdown in economic growth, which declined from its historic average of 4.1 percent to just 1.7 percent in 2017.
Overall conditions are expected to remain subdued in 2018, the report said, adding that the start of 2018 could see a reduction in activity and performance due to uncertainties around the impact of VAT.
“The UAE real estate industry is entering into a transitional phase, with VAT now in effect and key stakeholders seeking to decipher its immediate and longer term impact. Although VAT does not apply to residential rents and sales of new residential property, other real estate sectors could be negatively impacted by increased costs and cash flow challenges,” said Craig Plumb, head of research at JLL MENA.
Residential stock in Dubai is estimated at approximately 491,000 units at the end of 2017, with apartments accounting for more than 80 percent of total supply.