Property sales in Dubai plummeted in 2010 and the real estate market is likely to remain sluggish as new supply outweighs demand, according to consultants.
The total value of real estate deals fell 65% last year and the situation was not helped by a lack of lending, according to the latest report from Jones Lang LaSalle.
In the third quarter of the year less than 600 property transactions were completed, down from more than 1,200 in the same period in 2009.
A further 25,500 units are expected to come onto the market in 2011, analysts said, with no major project cancellations expected over the next year. ‘Dubai’s residential market will continue to experience a situation of oversupply and prices are not expected to recover before 2012,’ the report said.
‘Lending will remain a key factor in market recovery. The residential market will likely see improved lending in 2011 as more banks are injecting liquidity into the mortgage market,’ it added.
The report also shows that the gap between asking and achieved prices is widening. Average selling prices in the three months to December 31 were 15% lower than asking prices, compared to 10% in the same period a year earlier.
Rental and leasing prices are also feeling the pinch. Apartments in cheaper developments saw a significant decline in lease price. International City saw lease rates fall to less than AED50, 000 per annum for a two-bedroom apartment. In contrast, rents in Burj Khalifa’s Downturn stayed relatively stable, with two bedroom flats attracting an average annual rent of around AED125, 000.
Apartment rents across Dubai though saw an average decline of 8% in the fourth quarter of 2010 compared to the same period a year earlier, the report said. Villas fared better, with rents starting to stabilise as the rate of new supple entering the market slowed, the report added.
‘Rents for middle to high end villas such as those on Palm Jumeirah have remained relatively stable while rents in The Springs have declined substantially,’ analysts said. Overall villa rents fell an average of 11% in the fourth quarter, compared to the same period a year earlier.