Dubai, Property Market Outlook, Spring 2018
Cluttons has released its Dubai Property Market Outlook Report for Spring 2018.
While the residential rental market has shown signs of stabilising, the growing volume of off-plan investment stock, destined to be made available for rent after handover, is likely to pose challenges in the future. The ability of the rental market to absorb a high volume of new stock will likely be tested over the next three years.
In the residential sales market, affordability aside, one of the key factors that has likely contributed to the stability in values in Dubai’s more affordable residential areas is the distinct lack of new supply in these markets. We expect demand to remain firmly centred on new homes priced under AED 800 psf as affordability takes centre stage in the market. Developers appear to be ignoring this critical issue at present; however, the new proposed law around the restriction of off-plan sales until schemes are 50% complete may well be a blessing in disguise.
In the office market, we continue to record a range of activity across the board, from companies expanding to some who are consolidating operations - while there are a wide range of new market entrants, some are attempting to regear existing leases. This depth of activity is characteristic of a normal market where rents are neither rising, nor falling rapidly and is indicative of a market that is healthy and mature.
Elsewhere, industrial rents have continued to drift, following on from a challenging 2017, which saw the market being hampered by an excess amount of speculatively developed supply. This overhang of warehouse stock still remains across all submarkets monitored by Cluttons and is likely to put rents under more pressure as the year progresses.
And finally, as part of our expanded hospitality sector services, Cluttons has, for the first time, included an outlook on the emirate’s hospitality sector.
Although the hospitality sector remains a bright spot in the emirate’s property landscape, the rising number of hotel and hotel apartment properties, combined with the rise of Air BnB, is likely to sustain downward pressure on revenue per available room (RevPAR), which has continued to decline in recent months. We do expect that occupancy levels will be sustained as the city continues its aggressive drive to deliver enhanced tourism infrastructure, which is materialising in the form of new theme parks, world class hotel resorts and iconic attractions, such as the recently announced QE2 hotel.