Residential real estate prices in Dubai continued to fall in the first six weeks of the second quarter of this year compared to the first three months of 2015, according to the latest data.
Apartment lease rates decreased a nominal 2.4%, while sale prices decreased 1.5%, marginally tightening yields. Lease rates for villas decreased 0.6% and sale prices decreased 2.9%, which pushed up yields slightly.
In the first five months of 2015, apartment transaction volumes were down a modest 1.5%, compared to the same period in 2014. SFH volumes contracted almost 25%, over the same period. This is based on initial transaction data from the Dubai Land Department, which is subject to revision.
The report references income specific supply-demand imbalances. The most vulnerable segment is housing supply with current annual rents of AED100,000 to AED160,000 per annum, which could be oversupplied by up to 40% in five years.
The potential for total market disequilibrium increases significantly when adding announced projects into the supply pipeline. Total market vacancy could reach 11% by 2020. Factor in a healthy frictional vacancy and the total vacancy rate converts to a 7% oversupply.
There is an opportunity to reposition upcoming products to meet the city’s anticipated housing needs. If current announcements convert into launches, the probability for instability by 2020 will increase significantly.