Residential property prices in Dubai have bottomed out and in some locations are close to levels not seen since the property crash of 2008, according to property consultants Jones Lang LaSalle.
Its latest report covering the first three months of 2012 has found that villa sales increased 3% compared to a peak in the third quarter of 2008, but prices still remain 25% lower.
‘The villa market is expected to continue to outperform the apartment sector and whilst prime residential assets in well established locations continue to see improved performance, secondary buildings and locations are still suffering from rental and pricing declines,’ the report says.
Apartment sales in the emirate also started to stabilise in the first three months of the year, but prices remain low, down 34% compared to the third quarter of 2008.
Villa rental prices increased slightly, rising 5% compared to January 2009, but apartment rates continue to lag with asking prices down 30% compared with January 2009. However, year on year rental growth has been positive, with general residential indices 12% higher than in the first quarter of 2011.
Property prices in Dubai soared after the city opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments. But since the credit crunch of 2008 prices have fallen on average by 60%.
Supply is also holding prices back. Around 3,000 units were added to the emirate’s residential stock inventory in the first three months of 2012, while around 43,000 additional units are expected to be delivered by the end of 2014.
Office rents in prime locations remained stable during the first quarter of 2012 but occupancy rates increased to 35% in the Central Business District, the financial heart of the city.
Vacancy rates in locations such as unfinished Business Bay remain high at 90% and continue to suffer from very limited demand.
‘Although prime buildings are witnessing stable rental levels, secondary locations are expected to see further rental decline in 2012 due to the large proportion of new supply and weak tenant demand that is further exacerbating the supply demand imbalance and the two tier nature of the Dubai office market,’ the report points out.