[DUBAI] Dubai housing prices fell slightly and rents were flat in the first quarter of 2015 compared with the final three months of last year, a report by property consultants JLL showed on Monday.
The real estate sector in Dubai has been among the most volatile globally over the past decade, swinging from boom to bust to boom again. Prices recovered to near peak values after falling by about half from their 2008 highs, but are now weakening again.
Apartment sale prices fell 2 per cent in the first three months of 2015 versus the final three months of 2014, JLL said. Villa sale prices dropped one per cent, while rental values for both villas and apartments were flat.
"Sale prices normally move ahead of rents and this appears to be happening in the residential market in Dubai at present," said Craig Plumb, regional head of research at JLL.
"While this is resulting in increased rental yields, this is likely to be a temporary factor with more attractive yields eventually increasing demand and therefore sale prices again."
Nevertheless, JLL reiterated its January forecast that residential prices would fall by up to 10 per cent in 2015.
Compared with the first quarter of 2014, apartment sale prices were up 7 per cent in the opening three months of this year, while rental values gained 9 per cent. For villas, sale and rental prices climbed 6 and 2 per cent respectively.
About 730 residential units were delivered in Dubai in the first quarter, JLL estimated, with an additional 22,000 to be handed over by year-end. Dubai had 379,000 residential units as of March 31.
In Dubai's hotel sector, average daily room rates fell 5 per cent from a year earlier to US$273 in the 12 months to February, while occupancy rates edged down to 86 per cent from 88 per cent. Combined, this led to a 7 per cent drop in revenue per available room to US$235.
With a further 3,600 rooms to be added to Dubai's current supply of 64,900 this year, JLL warned that room rates could decline further.
Meanwhile, Dubai's office sector features a divide between buildings in prime locations, where demand is robust, and those elsewhere.
Prime location rents rose one per cent year-on-year in the first quarter to an average of 1,880 dirhams (US$512) per square metre and the vacancy rate for them fell to 23 from 26 per cent.
But demand for office space elsewhere remained weak, JLL said, exerting downward pressure on the rents which owners asked. "The flight to quality remains the trend in Dubai's office sector."