Sale prices of villas at The Springs community in Dubai have dropped by 18 per cent over the past year as buyers have opted for cheaper, newly completed stock in secondary communities such as Jumeirah Village Triangle and Al Furjan, according to Cavendish Maxwell.
The company’s fourth-quarter 2015 Dubai residential market report found that across Dubai, villa prices declined by 8 per cent year-on-year – a faster rate than the 6 per cent fall in apartment prices because of the increase in new stock. The Springs, a master planned community by Emaar Properties, was the area which experienced the steepest price decline, followed by neighbouring The Meadows (12 per cent) and Jumeirah Village Triangle (10 per cent).
In the apartments market, areas where there were above average declines included Motor City (10 per cent), International City (9 per cent) and Discovery Gardens (9 per cent).
The report also highlighted project delays, with only 8,800 of an anticipated 15,800 homes completed during the year. Alongside the 7,000 delayed properties, some 30,000 homes are scheduled for completion in 2016 – 30 per cent of which are villas. However, it is expected that many of these are also likely to be pushed back as a result of current market conditions.
Dima Isshak, a research manager at Cavendish Maxwell, said: “As prices declined during 2015, there was a slight shift in new buyer demand towards secondary locations such as JVT, Green Community and Al Furjan, as buyers were looking for more value for their money.
“Additionally the off-plan villa supply alongside the payment plans and incentives offered by developers has also attracted buyers, leading to limited activity in the secondary market.”
She said it was evident that the construction industry has been affected by the decline in oil prices, and with house prices and transactions falling, many developers are postponing completions and reassessing portfolios.
“We have seen very few launches in the second half of the year,” said Ms Isshak.
In Abu Dhabi, prices fell at a lower rate – 4 per cent for villas and 3 per cent for apartments – because of the lower levels of stock. Rents also remained stable, with villa rents actually increasing in areas such as Saadiyat Beach Villas, where supply remains tight.
The Big Four accountancy firm Deloitte said villa prices declined by 10 per cent and apartment prices by 9 per cent in 2015, but said the steepest declines were in JBR (down 15.8 per cent) and Downtown Dubai (15.1 per cent).
Deloitte said the drop was partly a reaction to exceptional price growth in the two previous years, negative sentiment surrounding the oil price and currency fluctuations, making property more expensive for buyers from key source markets in India, the UK and Russia. It expects rents to soften in the year ahead, but said that this “won’t be to the same degree” as recent price declines.
The Deloitte corporate finance managing director Robin Williamson argued that in the long run, Dubai still offered investment potential.
“Despite the decline in average residential sales prices in Dubai during 2015, price growth over the last four years reflects a compound annual growth rate of 11.6 per cent, which outperforms other leading global cities such as London, Paris and Singapore.”
Deloitte said that although published pipeline forecasts suggest 40,000 new homes will be delivered this year, consultation with “key developers” suggested this figure would be nearer 10,000.
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