Dubai residential rents declined by 3% during the second quarter of 2015, according to the latest ADIB/MPM Properties Real Estate report.
An increase of as 6,750 new residential units were delivered this quarter - taking the total Dubai residential stock to 479,000 units – was one of the main reasons for the decrease.
The majority of the new supply was added along the Sheikh Mohammed Bin Zayed road, with the International Media Production Zone (IMPZ) area accounting for 26% of the total supply.
Capital values for completed apartment units fell 3.5% quarter-on-quarter, with averages sale prices in Business Bay witnessing the biggest fall of 5%.
“The volume of new projects in the Dubai market means that 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 well managed, self-contained and mid-market properties, particularly close to the Expo 2020 site. We are also seeing a greater emphasis on buyer incentives and unique selling points, especially in the luxury segment and expect buyers to benefit from these trends.”
Dubai’s office sector continued to perform steadily, despite a substantial rise in new office supply with capital values remaining broadly stable, according to the report.
An additional 2.5 million sq. ft. of new office spaces is forecast to enter the market by the end of 2015 with the majority of this supply being delivered by a small number of developers / investors.
Meanwhile, Dubai’s prime retail sector continues to perform well with healthy footfall from Dubai’s residential population and tourist footfall from GCC countries, China and India. Average prime rental rates increased 6.4% in Q2 as new retailers struggled to find space in prime retail centres.
The hospitality sector saw over 1,200 hotel and hotel apartment rooms added during the second quarter, with the majority added within the Business Bay area (68%). The report found that the impact of the drop in Russian tourists has largely been felt across the luxury segment of the market, but double digit growth in tourist numbers from India, China and other African countries has kept the budget segment stable.