Dubai property market cools rapidly

Dubai developers halted delivery of about a quarter of the properties set for completion this year, bolstering apartment rents but failing to stop a 16% price decline, according to international real estate advisor CBRE.

About 6,000 nearly completed homes sit empty in newer developments such as Dubailand, Jumeirah Village Circle and Dubai Sports City as some developers withhold keys from buyers, according to CBRE, which visits developments to assess the extent of construction on various projects.

Single-family home rents declined 4%, compared with a 14% drop in values, said Matthew Green, head of UAE research at CBRE, at a conference on Monday.

Apartment rents were unchanged.

Rents climbed in lower-priced developments such as Sports City and Dubailand but fell in prime areas such as Palm Jumeirah and Dubai Marina, which had been quickest to recover from the city’s 2008 property crash.

Out of 20,000 homes CBRE estimated were ready for completion this year, 14,000 were brought to the market, Mr Green said.

The supply squeeze and growing leasing demand is maintaining a gap between rents and values.

While some developers purposely delayed completion, some projects were held back by the approvals process or buyers who failed to make payments, CBRE said.

“Those who have some flexibility in delivery pipelines will delay or stall the delivery until they presume that the capital values and rental values of those units will give them better returns,” said Nick Maclean, CBRE’s managing director for the Middle East region.

“The impact on the rental market is much less than the impact on the capital market. That’s partly the result of strangled supply.”

Withholding supply from year-to-year can mean deeper decline in rents or values once the properties are eventually delivered, Mr Green said.

CBRE estimates there are 48,000 homes set for completion through 2018.

Dubai is still witnessing a growth in demand from a largely expatriate workforce.

That means the completion of 20,000 new homes can be absorbed by renters but anything above that would boost vacancy rates, Mr Green said.

The value of transactions in Dubai dropped 33% this year to around 18.45bn dirhams (€4.56bn), CBRE said.

Dubai home values have been hit by the falling price of oil, tighter regulation and unsustainable price increases.

Residential property prices will probably fall by another 10% next year, mostly in the first half.

Home rents are expected to also decline in 2016, Mr Green said, without being more specific.