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[DUBAI] Dubai developers halted delivery of about a quarter of the properties set for completion this year, bolstering apartment rents but failing to stop a 16 per cent price decline, according to CBRE Group Inc.
Single-family home rents declined 4 per cent compared with a 14 per cent drop in values, Matthew Green, head of UAE research at CBRE, said at a conference today. Apartment rents were unchanged.
Out of 20,000 homes CBRE estimated were ready for completion this year, 14,000 were brought to the market, Mr Green said. The supply squeeze and growing leasing demand is maintaining a gap between rents and values. While some developers purposely delayed completion, some projects were held back by the approvals process or buyers who failed to make payments, CBRE said.
"Those who have some flexibility in delivery pipelines will delay or stall the delivery until they presume that the capital values and rental values of those units will give them better returns," said Nick Maclean, CBRE Group Inc.'s managing director for the Middle East region. "The impact on the rental market is much less than the impact on the capital market. That's partly the result of strangled supply." Withholding supply from year to year can mean deeper decline in rents or values once the properties are eventually delivered, Green said. CBRE estimates there are 48,000 homes set for completion through 2018.
Dubai is still witnessing a growth in demand from a largely expatriate workforce. That means the completion of 20,000 new homes can be absorbed by renters but anything above that would boost vacancy rates, Green said.
The value of transactions in Dubai dropped 33 per cent this year to around US$5.02 billion, CBRE said.
Dubai home values have been hit by the falling price of oil, tighter regulation and unsustainable price increases. Residential property prices will probably fall by another 10 per cent next year, mostly in the first half. Home rents are expected to also decline in 2016, Green said without being more specific.