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A further 20,000 units are expected to be completed by the end of this year, bringing the total residential stock to 338,000. Villa prices fell around 6% across the emirate in the first quarter to Dhs883 per square foot, JLL said. However, the report emphasized that there are pockets of stabilization within Dubai's high-end residential sector. "Lending will remain a key factor in the recovery," the report noted. "The residential market will likely see improved lending during 2011 as more banks are injecting liquidity into the mortgage market.
New data from Cluttons also finds that high end villas are performing better than the rest of the market. "Villa developments such as Arabian Ranches, Meadows and Palm Jumeirah have seen little to no movement over the last three months, which bodes well for the recovery," the property consultancy said. "Other villa locations, such as Victory Heights and Motor City have seen moderate drops of 3.6 % down from Q4 2010."
Residential real estate transaction levels were higher in January and February as financing became more available, with mortgage rates now available for as little as 4.99%, Cluttons noted. Similar to villas, apartments at the lower end of the market are seeing the largest decreases, with prices in areas such as Discovery Gardens and International City falling by 8.9%, Cluttons said. By comparison, units in high-end locations such as Dubai Marina, Old Town and the Palm Jumeirah saw price drops of 3.7% during the same period, reflecting a "flight to quality".
As new supply is added, apartments are likely to represent 79% of the residential stock in Dubai by the end of the year, JLL said.
Apartment leases drop 8%-10% from Q4 2010
On the rental side, Cluttons said that apartment leases dropped by between 8%-10% from Q4 2010. "The villa rental market has proved to be slightly more resilient in the more established freehold areas but is expected to soften as we move into the summer," the consultancy said. "Villa prices and rentals are expected to fall in some areas due to the ever-increasing supply of notable new freehold units in developments such as The Villa, Falcon City, Sports City and Jumeirah Village."
Cluttons said that the new developments' lack of amenities and infrastructure was curbing their demand, while at the same time putting pressure on prices in other areas.
On a positive note, Qatar's move to liberalise its visa regulations could put more pressure on the UAE to implement similar changes, which would provide a major boost for Dubai's residential market, JLL said.
Jeff Florian, Senior Reporter
