Dubai Property Market Sentiment Worse Than Last Year

Dubai Property Market Sentiment Worse Than Last Year

The Core Savills reveals that there were misconceptions about oversupply in the emirate but rents could continue to soften.

Only about 33% of people in Dubai believe the Emirate’s property market has shown signs of recovery, indicating worse sentiment than last year, according to a survey by Core Savills.

The real estate firm said respondents were less positive that the market was preparing for a turnaround in its report this year (34%) than Y 2016 (50%)

Of those that disagreed with seeing signs of recovery, 80% believed the market would be over supplied by Y 2020.

Core Savills said this demonstrated a clear divergence between market reality and perceived sentiment as there was a “40-50% lag in the last 5 – 6 years between the number of announced and delivered units”.

“In reality, nearly 15,000-18,000 units are delivered every year, which adds only 3 to 4% to the existing stock– albeit, a moderate number to be absorbed, even in the current market economic condition, and not a cause of extensive concern as perceived by the market,” it added.

The company said this was supported by its other findings that showed 20% of potential buyers below the Dhs1-M price point considered a lack of knowledge an important deterrent to their acquisition followed by macro-economic uncertainty and the lack of funds for a down-payment.

In the wider survey, the firm found that 90% of tenants in the emirate chose to stay in their existing unit, with 58% renewing under the same conditions and only 26% seeing a decrease in their rent.

The firm suggested their was room for further softening over the next 12 to 24 months as 75% of tenants had not seen their rent decrease despite many reports suggesting the current downturn had placed them in a better negotiating position.

“As this effect slowly unfolds, we warn against any future over-interpretations of further rental decrease as most of the recorded figures might turn out to be the statistical effects of a market that continues to self-adjust more widely, rather than further actual rental reductions in amplitude,” said Core Savills CEO David Godchaux.

In terms of investor appetite, off-plan units were found to be more popular with investors than end-users, with 65% of the former considering an acquisition in the below Dhs2-M price point compared to 35% of the latter.

This was despite more attractive plans on offer in the market that 64% of respondents said encouraged buyers to favor off-plan over ready properties.

The firm said access to mortgaged remained the biggest deterrent to buyers of property priced below Dhs1-M, cited by 65%  of respondents considering acquisitions in this category.

However, the number of respondents that believed mortgage regulation should be relaxed actually decreased from 71% last year to 55% in this year’s survey.

Overall, the market was found to be largely price-driven, with budget cited by 80% of respondents as 1  of their most important criteria and 1 in 2 stating it as their most important criteria.

Location was ranked one of the Top 3 most important parameters in their buying decision by 69%  of respondents and 24% as the most important factor.

This was followed by reputation in 3rd, which was listed as a Top 3 factor by 54% of respondents and a Top factor by 11% and build quality in 4th, cited by 26% and 6.5% respectively.

Stay tuned…

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