ValuStrat issue Q2 2016 Dubai Real Estate Market Report

The second quarter 2016 real estate review issued by leading local consulting firm ValuStrat –has shown that after 12 relative stable months, their residential VPI index displayed further indications of an early recovery in some of the areas it measures, signalling possible signs of a bottoming-out in property values across its coverage locations during the course of this year.

The ValuStrat Price Index (VPI) is a comprehensive data driven representation of the monthly price change experienced by typical freehold properties. During the last two years, the VPI has provided a ‘real time’ view of Dubai’s property cycle, leading the market with accurate commentary and an informed outlook. The second quarter 2016 VPI displayed an overall 1.1% annual decline in values. However, the monthly growth rate of residential values has been broadly stable since July last year. April and May’s residential VPI registered 98.0 index points while June dipped slightly by 0.1% to 97.9 index points. Statistical analysis has shown further indications of an early recovery in some areas, signalling possible signs of a bottoming-out in property values across the VPI coverage locations during the course of the year.

With a clear 12 month trend of relatively stable sales prices, the general sentiment has been cautiously optimistic towards a recovery commencing in the second half of this year – Evidence from the market place also indicates that both investors and end-users are now doing deals on well located and correctly priced properties.

“…for the second quarter of 2016, DLD transaction volumes for the VPI coverage areas witnessed quarterly increases of 14% for apartments and 7% for villas…” added Haider Tuaima, ValuStrat Research Manager.

Residential investment yields saw some gain as the median asking rents this quarter were 1.3% higher than Q4 last year and 2.8% higher than Q1 this year.

For 2016, the latest estimated total supply of residential apartments and villas to be completed amounts to 16,326 units. Compared to data reported last quarter, just over half of the scheduled units will be delivered this year. Nine off-plan residential projects were launched in Q2 to add more than 2,500 units to the residential pipeline by 2020.

Office transaction sales prices fell by 10.6% since last year and just 1.1% since the last quarter. Median asking rents for office space fell 4.6%annually, and 4.8% since the previous quarter. The median asking rent for office space was AED 1,130 per sq m (AED 105 per sq ft).

This quarter saw an additional 27,871 sq m (0.3million sq ft) of prime retail mall Gross Leasable Area (GLA) delivered as a result of the inauguration of phase one extension of Ibn Battuta Mall.

The total number of hotel rooms and hotel apartments as of May 2016 stood at 99,211. Two hotels with 776 hospitality units were added in Q2. Eleven new hotels were announced to add 3,028 keys to the pipeline over the next three years. The average occupancy during January till May was 83%, unchanged since last year. With increasing new hotel room supply, YoY Average Daily Rate (ADR) for the same period dropped by 11.5% and Hotel Revenue Per Available Room (RevPAR) fell 11.6% YoY.

Due to the Berxit vote, there is a concern of lower tourism and retail spending from British and European tourists as a result of reduced currency values against the US Dollar.