Dubai Real Estate Update July 2016

Residential property prices, as measured by Phidar Advisory’s Dubai 9/5 House Price Index, which is based on DLD data but includes only nine apartment communities and five villa communities in investor zones in Dubai, have continued to ease in July 2016 with apartment prices down -13.3% y/y and villa prices down -12.3% y/y. Apartments account for about 90% of residential real estate transactions in Dubai.

With the luxury (premium) and middle (standard plus) segments being hit the hardest, the low-range (or standard) segment in the villas sector was more resilient (-2.2% y/y) than low-range apartments (-8.3% y/y) in July 2016. With the summer months typically quieter in terms of real estate activity, we would be unsurprised to see some softness in the monthly transaction and price data over that period. The strength of the USD is a further constraint on demand, particularly for foreign investors.  

Transaction volumes declined in July

We have noted in previous reports that the decline in residential real estate prices over the last year has been accompanied by lower transaction volumes. This has been particularly evident in the villa sector. Overall, total transaction volumes declined by -27.7% m/m in July. On an annual basis, the total number of sales was also down -27.3% y/y in July due to lower villa transactions (-33.9% y/y/). The number of apartment sales recorded in June was also down by -26.5% y/y. 

Looking at the areas included in Phidar Advisory’s 9/5 Index, both apartment and villa transactions declined m/m in July, with most of the reduced activity in the luxury segments for apartments and the standard segment for villas. Overall, affordability is still a constraint but that there is demand for residential properties at the lower priced end of the market.   

Rents declined further

Rents in the Dubai 9/5 Index areas have declined on an annual basis in July, more or less aligned with the annual fall in sales prices. Apartment rents were down  -1.4% m/m (-6.7% y/y) in July while villa rents were also down -0.5% m/m (-10.4% y/y) last month. Yields on apartments eased slightly at 7.9% while yields on villas were unchanged at 4.8% in July compared to June. Rental yields are still relatively high while the softening of the rental market should keep putting downward pressure on sales prices.  

Download Dubai Real Estate July 2016