The pace of house price growth in Dubai is slowing.
House prices in the freehold areas of the emirate increased by an average of 6 per cent from April through June, down from the 10 per cent pace reported during the first three months of the year, according to a new report by JLL.
The property consultancy said that sales prices for apartments grew 7 per cent over the second quarter, while villa prices increased by 4 per cent, as buyers struggled to afford high asking prices.
The more moderate gains come after a year of rampant house price inflation in 2013 as sellers were emboldened by rising rents and Dubai winning the right to host the World Expo 2020.
JLL estimates that apartments in Dubai are currently worth 40 per cent more than they were a year ago and villas 23 per cent more.
The consultancy’s report chimes with figures published by the estate agents Asteco this month which showed that Dubai’s rapid house price growth slowed for a second quarter in a row this summer, with apartment prices up 6 per cent in the quarter and villa prices up 3 per cent.
Over the coming months, JLL predicted, house price inflation would continue to slow as the number of houses changing hands in the emirate also continued to slow and more new homes came to the market.
JLL’s research predicts that 40,000 new homes are set to be built in the emirate before the end of 2016, increasing the city’s housing supply by a tenth. It said that the current supply of housing in the city had risen to 372,000 now from 342,000 in 2011.
It further predicted that property developers would complete another 15,000 homes by the end of the year, while 17,000 more homes would come to the market in 2015 and 8,000 more in 2016.
“Although the numbers sound big, this is only around the same increase that we have seen over the last couple of years,” said Craig Plumb, the head of research at JLL’s Dubai office. “This will be a good thing because it will take some of the pressure out of the market.”
The news came as Dubai Sports City said it was on the verge of handing over 154 apartments at its Canal Residence West off Mohammed bin Zayed Road while Sol Properties, a subsidiary of Bhatia Group, announced that it was starting to sell 72 off-plan villas at its Bloomingdale scheme, which is likewise in Dubai Sports City.
Researchers at JLL and Asteco concur that after recording rapid growth in 2013, Dubai residential rents have been slowing.
In the three months to the end of June, JLL said, average apartment rents in Dubai increased by 4 per cent and villa rents rose by just 1 per cent – roughly similar levels to Asteco’s research, which found that apartment rents rose by 4 per cent and villa rents were up 4.6 per cent over the period.
That means average apartment rents now stand 27 per cent higher than at this time last year, and villa rents are 11 per cent up.
Dubai’s booming hotel sector was the asset class predicted to experience the largest increase in supply.
JLL predicted that the number of hotel rooms in Dubai would grow by a staggering 27 per cent by the end of 2017, increasing to 79,700 from 62,600 today, as developers attempted to cash in on 85 per cent occupancy rates and average room rates of US$276 per night.
On the retail front, JLL said that average vacancy rates of just 8 per cent and rapidly rising retail rents were prompting developers to build another 496,000 square metres of new shopping space in the city by the end of 2016, boosting supply by 17.2 per cent.
“Visitor numbers have been increasing by about 15 per cent per annum over the past few years,” Mr Plumb added. “As long as the numbers continue to increase in this sort of manner then there will be enough demand to fill these new shops and hotels.”
lbarnard@thenational.ae
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