Dubai housing rents to face pressure after stabilising in Q1, according to ADIB

Abu Dhabi, 06 May 2015:

Dubai residential rents stablised over the first three months of 2015, and are likely to face pressure with a flood of new supply coming to the market in the months ahead, according to the latest ADIB Real Estate report.

While the first quarter saw 2,000 new apartments and villas added to the market, the delivery pipeline for the rest of the year is an estimated 19,400 units, which will weigh on rental prices and sales and encourage developers to target more affordable properties, the report says.

Average apartment rents in Dubai rose 1% quarter-on-quarter, and 5% year-on-year. Rents for villas meanwhile fell by 5% in the first quarter in some developments.

Residential sale prices broadly declined quarter-on-quarter, though they remain generally positive on a year-on-year basis. Along with the abundance of new supply, attractive mortgage rates and payment plans will contribute to what is becoming a buyer's market.

"The amount of new projects in the Dubai market means properties will increasingly need to appeal to potential buyers' sense of value," said Paul Maisfield, CEO of MPM Properties, the real estate advisory subsidiary of Abu Dhabi Islamic Bank (ADIB). "That means a shift towards more affordable properties, particularly close to the Expo 2020 site, and an emphasis on incentives and unique selling points, especially in the luxury segment. We expect buyers to benefit from these trends."

The office segment had a strong start to the year, with average grade-A rents gaining over 15% year-on-year and occupancy rates improving. This is a positive sign for the market, pointing to a limited impact from lower oil prices, and the emergence of new commercial hubs such as Barsha and Tecom will continue as the government takes further steps to attract entrepreneurs and improve the ease of doing business.

Meanwhile, prime retail space in Dubai remains in high demand, with rental growth of up to 10% during the first quarter. The sector should remain robust with various initiatives to increase tourist numbers and the continuing development of convenience, community and strip retail proving popular with local residents.

An increase in 5-star room supply and a drop in Russian tourist numbers took a toll on the hotel sector in early 2015, with revenue per average room (RevPAR) declining 9% in the first quarter compared to the same period last year. However with the government focusing on expanding into new segments such as Islamic and film tourism and Chinese tourist numbers growing significantly, the outlook is positive for the short to medium term.

ADIB's real estate market data and rental indices are collated from transactions within its portfolio of over 23,500 units under MPM Properties' management.

Please visit http://downloads/ADIB-MPM-Dubai-Q1-Report-2015.pdf to get the full report.

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