Chestertons MENA, a leading international property agency, has released its latest residential market report for Dubai today (01 May 2016). Although the report recorded relatively flat performance for the emirate in Q1 2016, it noted that in secondary locations, landlords continue to benefit from higher rental yields, with a 7.5% gross yield for apartments and 4.7% for villas across the city’s most popular affordably priced developments.
“Overall, market yields have retained some degree of attraction as we saw residential prices drop in the first three months of the year, with apartments proving to be the most successful option in terms of yield. And it is the secondary locations that are once again offering the highest yield, ranging from 7.7% at Dubai Silicon Oasis to 9.5% and 9.6% respectively at Discovery Gardens and International City,” said Declan McNaughton Managing Director UAE, Chestertons MENA.
“However, despite ongoing sustained demand for affordable rental units, as end users look to reduce the cost of living by relocating to secondary communities, the villa segment still provided an overall average yield of 4.7%, which is encouraging for investors in it for the medium to long term,” he added.
The Springs registered the highest investor yield at approximately 6.4% in Q1, while apartment yields stood at 7.5% with studios recording the highest yield figure at 8.4%.
On average there was a 0.5% decrease in apartment rental rates during the first quarter of 2016, with Downtown Dubai recording the highest drop of approximately 5%. In secondary locations, a one-bedroom apartment is currently renting for between AED 55,000 and AED 73,000 with a two-bed unit from AED 75,000 and AED 95,000.
At the top end of the market, a one-bed in DIFC rents for an average of AED 118,000 per annum while a two-bedroom apartment is going for an average of AED 163,000.
In the villa rental market, Palm Jumeirah homes fared slightly better, registering a decline of just 2.5% with three-bedroom villas renting for an average of AED 325,000 and four-bed residences for AED 448,000. Mudon is the most affordable villa community currently, with three-bed homes renting for AED 188,000 per annum and four-beds for AED 203,000.
“The outlook is less than rosy, however, with rental demand expected to be weak at current prices as the economic situation could adversely affect the disposable income levels of residents and we expect to see further correction of rental rates in the high-end apartment and villa segment as the year progresses,” said McNaughton.
The average sales price per square foot for residential units in the city stood at AED 1,221 in Q1 2016 with available supply of 461,000 homes. New supply accounted for just 1,100 units in the apartments segment and 46 and 14 units respectively at upscale villa communities of Jumeirah Golf Estates and lower end Jumeirah Village.
Average apartment sales prices recorded a negligible 0.7% decline. Popular apartment developments that saw positive sales price movement included Dubai Silicon Oasis units at AED 826 per square foot against AED 785 in Q4 2015, DIFC up to AED 1,875 versus AED 1810, and Remraan at AED 807 versus AED 790.
The villa sales market recorded an average 1% decline however Q1 2016 increases were seen in locations such as Victory Heights which was up to AED 1,195 per square foot, against AED 1,185 in Q4 2015
“It was a positive first quarter for transactions, with a quarter-on-quarter increase of 11%, which amounted to total transaction value of AED 27 billion. We also saw mortgages approvals jump by over 50%, which is encouraging,” remarked McNaughton.
In the office market total transactions equated to AED778 million, down 7% from Q4 2015. March recoded a 30% increase on February figures with sales and rental rates increasing in Business Bay, JLT, Dubai Silicon Oasis, DIFC and Tecom.