Stability throughout Q3, with supply levels providing a positive outlook for those invested in well-established areas.
Diversification remains key.
Apartment sales prices remained fairly stable over the third quarter of the year. However, a significant increase in off-plan sales, predominantly due to the increased marketing activity, agent incentives and post-completion payment plans has resulted in a slight decline in sales volume for the secondary market.
A disconnect between the sales and rental market performance has remained prominent with an overall response that sales prices remain promising with prices increasing year on year (Y-o-Y), whilst the rental market continues to soften over the quarter comparing to 2016. Historically Q3 has always been a more challenging month for the real estate sector, the heat and holidays results in a quieting city with an outlook to pick up the economic pace in the final quarter of the year.
High Yield Advisors’ (HYA) independent research highlighted there has been a continuous rise in new project handover throughout Q3, with the affect to influence the rental rates in some areas. Whilst the employment rate in the region remains static the rental demand doesn’t sufficiently reach the levels of present new unit supply. Increased government spending in infrastructure, hospitality and retail in the run-up to Expo 2020 is expected to revitalize the market.
Taking into consideration the oversupply in recently developed areas, it is prominent that the more recognized and developed parts of the City see a more stable rental performance. Until an increase in demand will follow thanks to future improved macroeconomics, it is anticipated to see rental rates softening in areas that are expecting new unit supply to the market. Areas such as JLT and Dubai Marina, where new unit supply is more limited, will tend to deliver less volatile rental rates.
For those areas subject to an increased volatility in rental price, the selectivity is fundamental in choosing a quality property becomes a useful approach to contain the oversupply effect on rental rates, as those properties will keep the right level of attractiveness for the Tenants.
HYA’s research market data analysis discovered that high quality and rated buildings in areas with high supply generally retain occupancy and yield, whilst the lower rated might see a wider fluctuation; reiterating the importance of skilled and diversified property portfolio planning.