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Apartment prices in Dubai dropped 6% overall in the third quarter on the back of increased supply entering the market, the report said. However, prices in more affordable areas such as Discovery Gardens and Jumeirah Lake Towers (JLT) remained stable at Dhs500 ($136) and Dhs750 ($204) per sq ft respectively in the third quarter compared to the previous three months, the report said.
At the other end of the price spectrum, prices in Downtown Burj Dubai also remained unchanged at Dhs1,300 per sq ft, the report noted. Meanwhile, villas in Emirates Hills, Jumeirah Islands and the Green Community also held steady price-wise at Dhs1,600, Dhs950 and Dhs700 per sq ft respectively, the report said.
Elaine Jones, the chief executive of Asteco, said the changes were part of an overall shift in the sector's focus from "short-term sale profits" to "maximising rental yields and long-term capital management".
Dubai rental market also declines
The performance of the apartment rental market was similar, as average rental rates fell 6% in the third quarter, but units in JLT slid just 2% with 3% adjustments in Discovery Gardens and Downtown Burj Dubai.
"The number of transactions, which are generally at their lowest during the summer and Ramadan, has been surprisingly active with a number of people taking advantage of the quiet months to look for value for money accommodation. Therefore, the drop in rents has proved to be less significant than in Q2.
"Although further declines across the board cannot be ruled out, the drop in [Discovery Gardens and JLT] is expected to be less noteworthy due to the already lower rents," explained the report.
The villa rental market fared slightly better, but rates still declined 4% quarter on quarter due in part to increased stock coming into the market in Dubailand and Dubai Silicon Oasis, the report said. Despite this, rates in the Green Community and on Palm Jumeirah remained unchanged with the market expected to gain momentum in the coming months as tenants look to upgrade from apartments.
"With an increase in activity over the summer, we expect this momentum to continue in Q4 2010 with expected demand predominantly coming from tenants looking to move from apartments to villas as rental levels continue to adjust. Villa rental rates seem to be more robust compared with apartments, which in part has to do with the fact that the current and future supply of villas is marginal compared to apartments," said the report.
Investor relief at Nakheel project restart
A new study by real estate specialist Cluttons paints a similar picture, reporting that 'sale and rental rates have continued to fall across the UAE in the third quarter as new supply from new developments and relocation exerts downwards pressure on prices'.
Freehold transactions over the last quarter in the UAE have been slow, the report added, with buyers adopting a 'wait and see' attitude. "Buyers and tenants are both now in a strong position to negotiate on prices." the study said.
However, the report also finds that growth prospects in the UAE property market 'remain strong in the medium to long term' as the country remains a 'powerhouse as the logistical hub for the region'.
"Nakheel's recent announcement on the restart of six of its projects in Dubai including Jumeirah Park, Jumeirah Village and Al Badrah comes as a welcome relief for investors," the report added. Cluttons predicts that secondary sales in these projects, which are nearing completion, will restart, with an increase in three and four bedroom villas.
Jeff Florian, Senior Reporter
