Residential prices recovery predicted by 2011
The Jones Lang LaSalle report titled 'Dubai Real Estate Market Overview' for the first quarter of 2010 said Dubai residential market prices are likely to recover by 2011. Dubai will deliver a total of 22,000 residential units in 2010 and 25,000 in 2011. Dubai real estate is already facing over-supply of residential properties and apartment rents continue to decrease though villa rents have stabilised.
The first quarter of 2010 witnesses Dubai complete 22 per cent of the 22,000 units to be delivered in 2010. This sums total residential stock currently to 278,000 residential units and 320,000 units at the end of 2011. Among this apartments constitute77 per cent total residential stock by the end of 2011.
Project delays and cancellations will follow in the same trend this year, which will lead to reduced future supply estimates.
Residential asking prices marginally increased since the fourth quarter of 2009 with the "achieved prices" declining by -5 per cent to touch around Dh860 per square foot. Apartment rents have seen a year-on-year (Y-o-Y) decrease of -21 per cent and quarter-onquarter (Q-o-Q) decrease of -4 per cent with affordable areas seeing larger declines than high-end residential communities.
With regards to villa rents, the year-on-year (Y-o-Y) decrease of -32 per cent and Q-o-Q change of -1 per cent.
JLL said lending would be a key factor in market recovery. The residential market saw signs of improved lending throughout 2009, which was reflected in an increase in sales transactions. "This trend is likely to continue into 2010," said the report.
The value of mortgages as a percentage of sales value increased throughout 2009 from 33 per cent in the first quarter of 2009 to 46 per cent in the fourth quarter of 2009 and is expected to increase further in 2010 as more mortgage funding becomes available.
Certain locations within the office sector are facing further downward pressure on rentals with the overall vacancy rate in Dubai increasing to around 35 per cent and likely to exceed 45 per cent by the end of the year.
The report said that vacancies in the office sector continued to increase with the addition of 1.8 million square feet of new stock being completed in the first quarter of 2010, which include office buildings such as Business Bay (One Business Bay and O-14).
Some of the reasons for this have been the fact that a number of completed office projects in Dubai have not yet been handed over for occupation due to contractual and infrastructure delays.
Meanwhile, the total office stock at the end of the first quarter of 2010 stands at about 46 million square feet consisting of office buildings in Business Bay, Dubai International Financial Centre (DIFC), Jumeirah Lake Tower (JLT) and Tecom.
An additional 30 million square foot of office space is scheduled to be released in the next two years across 2010 and 2011.
Total tenant demand as per JLL inquiries at the end of the first quarter of 2010, amounted to 2.5 million square foot of office space.
Existing tenants are still looking to dispose off surplus space with the total of 300,000 square foot of previously fitted out tenant disposable space available. The financial and professional services sector consists of 50 per cent of total current occupier demand.
JLL said that falling rents have encouraged more businesses to implement strategies for their future growth.
Demand in 2010 will fall short of additional supply causing vacancies to increase across the market and rents to fall further.
Although Dubai's office market is likely to experience a supply overhang, there is still a shortage of good quality future supply (location, specification, legal title), which is likely to cause vacancies in the CBD to increase at a much slower pace than the rest of the city throughout 2010
Average rents peaked at the fourth 2008 and have declined to around Dh200 per square foot.
