Many buyers who were potentially on the fence regarding property purchase decisions have decided to enter the market.
Residential property supply is set to hit an all-time high in Dubai in 2020, keeping prices and rentals under pressure and attracting more cost-conscious buyers due to higher affordability, say analysts.
Real estate research firms predict that around 50,000 units will hit Dubai this year, with most of it attributed to the spillover of expected handovers from last year. It is believed that the decline in prices and rentals will slow down this year as 2020 will be a pivotal year for Dubai’s economy and the real estate market.
Property analysts believe that 2020 will be a key indicator to ascertain where the Dubai’s property market stands now in terms of demand and supply balance and set the direction for the prices and rentals in coming years.
Aditi Hariharan, associate partner for strategic consulting and research at Cavendish Maxwell, said tangible measures have now been taken to curb oversupply, including the formation of the Higher Committee for Real Estate Planning and developers holding back on new launches and focusing on projects under construction instead.
Within the first half the year, Hariharan expects over 50,000 units of residential supply to enter the market as developers hand over projects delayed in 2019, which could exert downward pressure on prices.
As a result of decline in prices, Zhann Jochinke, chief operating officer of Property Monitor, said many buyers who were potentially on the fence regarding property purchase decisions have decided to enter the market, as reflected by the record transaction figures in 2019.
“Whilst this is a strong indicator of hitting a floor in terms of prices, other indicators such as high vacancy rates and the expected upcoming supply are yet to show signs that support stabilisation. Looking ahead to 2020, the Expo is going to be a key indicator of where we stand in terms of demand and supply,” he said.
Prathyusha Gurrapu, head of research and advisory at CORE, says the market continues to witness increasing downward pressure on prices due to record supply volumes across all asset classes and the wider global economic and regional geo-political uncertainty.
“Dubai will be at the global center stage during Expo 2020 and while we are excited to see what this year brings to the city in terms of population growth, tourism and investment inflows, we remain cautiously optimistic on the city’s real estate near to midterm outlook. A positive turn around in prices and bottoming out of the market is yet to be seen, however, we expect this year to act as a catalyst towards real estate recovery as the market continues to adjust and potentially plateau over the coming years,” she added.
She said landlords are flexible in order to maintain occupancies, with leasing incentives expected to continue, including rent-free periods and longer contract terms, refurbishing units or contributing to utilities. “We are also witnessing higher number of cheques increasingly becoming the norm, particularly in the lower to mid-market segment where tenants are price sensitive and barriers to relocation are low.”
According to CORE, the average year-on-year of sales price drop was over 8 per cent and rental drop was over 9 per cent in 2019. “We expect both rentals and sales prices to remain under downward pressure this year. However, in 2020, we expect the market to continue being occupier friendly, with underlying demand being met, evidenced by a steady increase in transaction volumes,” Gurrapu said.
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