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Dubai house prices, rents fall in Q3 2014

Freehold transactions in Dubai fell by almost one-third during Q3 2014 and average rents across freehold areas dropped by 0.4 per cent

The property price growth rate in Dubai has slipped by 0.3 per cent in the third quarter of 2014, marking its first decline since Q1 2011, says a new report by Cluttons.

According to the international real estate consultant’s Dubai Winter 2014 Residential Market Outlook report, Dubai’s off-plan sales market has for the most part retained its momentum, despite the stagnation in capital value growth and the fall in the overall level of transactions.

Freehold transactions in Dubai fell by almost one-third during Q3 2014 and average rents across Dubai’s freehold areas dropped by 0.4 per cent during the same quarter, the report says.

Steve Morgan, chief executive of Cluttons, Middle East says: “Many households that are determined to purchase, now view off-plan properties, as good value.” Emiratis and Indian investors have shown great interest in off-plan models with the former group mostly comprising of but-to-let investors, he adds.

Average house values are still however 10 per cent up on Q3 2013 and currently stand at AED1,493 per square feet. Apartments gained a 0.4 per cent rise in average prices, while villa values decreased by 1.2 per cent during Q3.

Cluttons latest research also shows that, one year after the introduction of the Federal Mortgage Cap, the market is now showing signs of succumbing to deposit requirements and is entering an anticipated period of more measured and sustainable expansion.

Average house values are still however 10 per cent up on Q3 2013 and currently stand at AED1,493 per square feet. Apartments gained a 0.4 per cent rise in average prices, while villa values decreased by 1.2 per cent during Q3.

“The government’s introduction of the Federal Mortgage Cap and increase in property registration fees, has reined in the extraordinary growth seen in the market over the past 24 months,” Morgan says.

Rents dip

The average rents across the emirate’s freehold areas have dropped by 0.4 per cent during Q3. However, average rental values remain nearly five per cent up on Q3 2013, the report states.

Despite the cooling of rents, tenant demand remains exceptionally strong, underpinned by the rapid economic expansion and the subsequent rise in the level of jobs being created across the city.

Faisal Durrani, Cluttons’ international research and business development manager says: “In particular, the leisure, hospitality, aviation, finance, banking and real estate sectors have seen rapid expansion, as evidenced by the level of housing requirements from these sectors.”

“In the short to medium term, we do not anticipate a slowdown in the rate of job creation, which suggests that the current period of rental stagnation is likely to be short-lived,” Durrani concluded.