Dubai: Residents burdened by paying out high rents could be in for some respite in 2017 — 20,000 new homes are to be delivered next year and the majority of them in more affordable locations such as Sports City, Dubailand and Silicon Oasis. The three locations could make up 50 per cent of the forecast supply.
But much depends on whether developers will actually stick with their promised delivery timelines, according to a new update from realty consultancy CORE.
Last year, less than 10,000 units were eventually delivered against the earlier expectations of 15,000 homes plus, and this year too could end up at around the same tally. But, next year, chances are that actual handovers will stick with the developer promises — many of the expected projects in areas such as Dubailand are already quite near their completion dates.
And that would leave residents with choices — they could either consider a shift to a lower rental location or they could finally take the plunge and buy that mid-market property. (Even if US Federal Reserve rates continue, local mortgage rates are still deemed as accessible.)
But those tenants chasing a lower rent also seem to taking their time over it — “The trend of tenants moving out to outer areas, trading connectivity for larger units, exists — however, it is still slow as the cost offset doesn’t match up to the inconvenience and charges incurred,” said David Godchaux, CEO of CORE, who is projecting a turnaround for Dubai’s property market next year.
Also, tenants in established locations such as Business Bay or Dubai Marina have reasons to stick around — these areas recorded rent declines of 3 and 2 per cent, according to the report. The Greens dipped 2.5 per cent as did Discovery Gardens. (Jumeirah Lakes Towers and Jumeirah Village were the only districts to mark a marginal rise, by about 1 per cent.
As such, the mix of newly delivered housing stock next year represents a marked change from the past, according to CORE. High-end properties will make up only about 19 per cent of the total residential stock in 2017 as compared to the 30 per cent. (In the boom years, high-end used to be make up 80 per cent and more of the pipeline.)
The buying sentiment this year was decidedly centred around properties in the Dh2 million and under range. Nearly 75 per cent of overall freehold transactions in Dubai answered to this description. And of this, 45 per cent, were even below Dh1 million.
Apartments are the obvious beneficiary of this demand, making up 85 per cent of the buying. “These figures reinstate the growing shift towards home ownership by cost-conscious, end-user occupiers,” states the report.
Dubai’s developers, at least some of them, have already adjusted their off-plan mix to meet this reality. Others have decided to put off their high-end launches to next year, expecting the market forces to stabilise by then.
Meantime, the chase is on for the best mid-priced offering out there. “We expect the continuing interest from investors to capitalise on the bottoming market, particularly for high yielding districts and the mid-market segment within the price range of Dh800,000 to Dh2 million, to push transaction activity upwards,” the report notes.
“Off-plan apartment projects in Jumeirah Village and Sports City, especially those nearing completion, are enticing end-user occupiers as both these areas offer projects with better facilities and larger layouts.” But this could also have some consequences for high-end units. With fewer of them being built, at least next year, any spike in demand could push up values of existing well-maintained stock.
“Prime apartments in Palm Jumeirah, particularly on the trunk, are expected to see steady off-plan activity in the run up to delivery due to better connectivity and access to infrastructure,” the report adds. “However, a similar response may not been seen for comparable projects located further away on the crescent.”