Sales prices of flats in Dubai dropped by an average 6 per cent in the third quarter of the year, as tens of thousands of square feet of new space came on to the market, a property consultancy says. Asteco Property Management said rental rates contracted by 6 per cent and office leases declined by another 3 per cent. Elaine Jones, the chief executive of Asteco, said the changes were part of an overall shift in the sector's focus from "short-term sale profits" to "maximising rental yields and long-term capital management".
The data depicts a market still under pressure almost two years after the global financial crisis spilled over into the regional economy and sent prices tumbling. The issues in the Dubai property market will feature prominently in two conferences this week, including the Cityscape conference that brings many of the top developers together. At the MENA Real Estate Society's first annual conference, delegates will speak in panel discussions with titles such as "Policymaking in Real Estate, Balancing Supply and Demand" and "New Perspectives and Survival Strategies of the Off-plan Market".
While a large inventory of space is playing a major role in pushing prices down, the lack of a long-term residency visa and financing for home purchases is holding back the Dubai market from a recovery, said Liz O'Connor, the director of residential sales and leasing at the property agency Better Homes. To date, 71 per cent of Better Homes's transactions have been in cash, compared with 67 per cent last year. And since last year, buyers of property are able to obtain only a renewable six-month visa to live in Dubai, which means homeowners have to go through an application process twice a year.
Ms O'Connor said there was a general interest in good deals in the better established areas such as Discovery Gardens and the Marina. More than 80 per cent of Better Homes's clients were looking for properties costing less than Dh3 million (US$816,770). Most of these clients hail from Britain or India, Ms O'Connor said. "Leasing inquiries and transactions have been fairly steady throughout 2010," she said. "We didn't witness the large volumes of transactions over the same period in 2009 caused by people upgrading their properties and moving into Dubai from other emirates.
"However, we are now seeing a tightening up of stock in some of the areas where there are mainly villas such as Meadows, Jumeirah Islands and the Palm." And for the first time in nearly two years, the agency is seeing more high-net-worth individuals looking for villas and apartments, Ms O'Connor said.