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.