The fall in Dubai property values and rents is set to continue over the summer, despite some predictions that the market has bottomed out, a local expert has warned.
In its latest research note, Phidar Advisory said that since Dubai rents peaked in May 2014, the market had declined by an average of -0.3 percent.
However, in May, the monthly rent decline widened to -1.3 percent.
“In a down-cycle, the lowest advertised rent is particularly sensitive to market shifts and can be the harbinger of market trends,” the research said.
“By the beginning of June, the lower limits of asked rents decreased by 4.1 percent compared to the same week of the previous month.
“This is a significant monthly decrease, even for Dubai real estate, a market that regularly experiences annual volatility of 20-30 percent, both on the up- and down-cycles."
Phidar said that although less than 20,000 residential units had been completed over the past year, giving some stability to the market, anecdotal evidence pointing to a pattern of redundancies and slowed job growth – as a result of the impact of the oil price and tighter regional liquidity – might be beginning to take their toll.
“Rent declines usually turn into sale price declines, especially considering the prevalence of yield-sensitive investors,” the research added.
“So, the sale price decline will likely accelerate in the coming months.”
Phidar also said that the oversupply in Dubai’s residential market was expected to remain until 2019.
The firm said that apartment rents had dropped by 1.5 percent during the first half of the second quarter, while sales fell by 3 percent.
Villa rents declined by 3.2 percent, although prices remained stable. In March, real estate consultant ValuStrat said that Dubai property prices may have bottomed out, with values rising slightly in February.
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