Monday 29 / April / 2024
Muscat: Dubai’s residential sector experienced further modest declines in rentals during the first quarter of 2017, with a 1 per cent dip quarter-on-quarter, driven by an increase in the number of available housing options and more constrained demand, according to the Dubai Market View, in a review ofthe first quarter by global real estate advisor CBRE.
Rental rates fell by an average 1 per cent, primarily driven by pressure on larger apartment unit types. Landlords are also becoming increasingly flexible with rental rates, and tenants are able to negotiate rents. Yet, residential sales prices remained relatively stable during the first quarter of 2017, declining by less than 1 per cent.
Future supply levels continue to rise as developers make a concerted push in the build up to the Expo 2020 event.
“Consequently, this is driving annual deliveries well above the five-year average, with expectations that these numbers will continue to rise in the short to medium term, as new master plans come on stream,” saidMat Green, head of research and consultancy UAE, CBRE Middle East.
“Amidst a flurry of off-plan launches, the competition to attract investors is also rising, meaning developers are having to become more creative in order to sustain desired levels of sales velocity. This has driven the formulation of new sales strategies aimed at expanding the size of the potential investor base and to appeal to new demographics of untapped demand. The main concentration of these strategies has been towards payment plans and lower ticket prices,” added Green.
Hospitality sector
According to the report, overnight visitors reached 14.9 million during 2016, reflecting close to 5 per cent growth over the previous year’s performance. The emirate witnessed substantial double digit growth in the number of tourists from China, India, Pakistan, Philippines, and Russia.
Despite the increase in visitors, Dubai’s hospitality market continues to witness declining Average Daily Rates (ADRs) and Revenue per Available Room (RevPARs), due to rising inventory levels and a strong US dollar, which is resultingin the emirate becoming a comparatively costly destination for European visitors, according to data from STR Global. Further, the volume of new hospitality supply continues to rise, with some 35,000 new hotel keys and hotel apartments to be potentially delivered before the end of 2019.
“With inventory levels increasing at such a rapid rate, at a time when other headwinds continue to have an impact, we expect to see further decreases in average ADR’s during the course of 2017, as revenue pressures prevail.”
“According to STR’s year-on-year performance figures for February, average ADR’s are down by around 5 per cent, while RevPAR’s are down by 1.3 per cent. This shows a continuation of the deflationary revenue trends that have impacted the market over the past two years. However, positively, occupancy rates were found to be up by 3.8 per cent year-on-year, underlining the relative resilience of the local market, despite the obvious challenges within the wider tourism environment,” noted Green.
Office market
According to the report, the office market has not experienced any major shift in activity levels.
“Onshore building requirements have witnessed a slowdown, which has resulted in a softening of rentals for non-freezone buildings along the Sheikh Zayed Road and parts of Business Bay. Large corporate occupiers are still demanding and seeking good quality efficient accommodation over contiguous floors, particularly within freezone locations,” said Green.
“Dubai is expected to see a modest rise in economic output during 2017, driven by increased government spending and new job creation. The non-oil sector will continue to propel the emirate forward, with a forecasted growth rate of 3.1 per cent, according to the Economic Development Committee,” Green added.
