21/11/2016 05:51 AST
The market for luxury property in Dubai continues to weaken as the number of high-level jobs has declined, with prices for Burj Khalifa apartments 15 per cent lower year-on-year and prices at Palm Jumeirah falling by 12 per cent, according to Cluttons.
The fall at the top end of the market is in contrast to the performance of mid-income housing units, the firm said, where prices in areas such as Motor City, Business Bay, Uptown Mirdif and even Emaar’s developments in Downtown Dubai are now flattening.
"While Dubai’s economy is still diversified, it’s the senior level jobs that have been lost," said Faisal Durrani, the head of research at Cluttons. "Also, the rate of [job] replacement and creation has slowed down.
"Dubai serves as a regional centre for the export of financial and business services, and with austerity measures continuing to filter through, there is less and less demand for senior-level jobs and there is less merger and acquisition activity taking place in the region."
Overall prices across the city declined by 2.4 per cent in the three months to the end of September, meaning prices are 7.4 per cent lower year-on-year, and rents are 8 per cent lower, Cluttons said.
Mr Durrani said that he expects prices will have dropped 10 per cent by year-end.
Cluttons has said that it does not expect a recovery in Dubai’s property market until the end of 2017, when job creation rates are expected to be higher as a result of Expo 2020-led infrastructure work.
"This is a very sentiment-driven market. Things like the opening of the Dubai Canal, construction commencing on Emaar’s The Tower and tenders imminently going to be out for Al Maktoum Airport … all of these things are helping to keep domestic sentiment quite high, which is encouraging."
A note of caution was sounded, however, about the potentially negative effect that increasing supply could have on the market.
Almost 34,000 new units have been announced so far this year, with 30,000 of these being unveiled before and during the Cityscape Global conference in early September. Some 12,900 of these are being built by Nakheel to sit within its rental portfolio.
Mr Durrani said that he expected the delivery of new units to be phased so that the market is not overburdened with excess supply. It expects 8,000 homes to be completed this year, 12,000 in 2017 and 20,000 in 2018.
"We’re probably not going to see those big hits to the market as announcements generally suggest," he said. "But things could change. If we see surges in supply, that will dampen the prospects of a return to stability."
Asteco Property Consultants also published its third-quarter report today which argued that prices have remained relatively stable. Although the number of transactions completed dropped by 24 per cent quarter-on-quarter, they were still 12 per cent higher year-on-year.
The rental market has experienced a switch in demand towards cheaper communities, with villa rents in Jumeirah and Umm Suqeim falling by 19 per cent and 12 per cent respectively year-on-year, but increasing in Jumeirah Village Circle and Dubai Sports City.
John Stevens, the managing director of Asteco, said that with the supply pipeline increasing and off-plan launches generally offering much cheaper units, "there seems to be little potential for both rental and sales price growth, except within select developments".
The National
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