Property prices in Dubai have fallen by around a quarter in under four years, a new report reveals.
The drop in the market of around 25 per cent has been blamed on oversupply of high-end luxury developments and falling oil prices.
Across the United Arab Emirates and in Dubai in particular, the market has nose-dived over the last two years with prices on the Palm Jumeirah island, one of Dubai’s most popular places to live, falling by 9.5 per cent last year.
Capital values across Dubai Marina – a huge man-made area with yachts and sandy beaches – as well as Jumeirah Lake Towers – which consists of 80 towers built along the edges of three artificial lakes – dropped by five to seven per cent over the same period.
The UAE Property Report by high-end real estate agents, Savills, found many of the villa and townhouse sectors, popular with expats, were down across the board.
Skyscrapers in Dubai Marina overlook Palm Jumeirah which saw property prices fall by 9.5 per cent last year
The Construction site for the Burj Dubai as of December 11, 2005 in Dubai. When it was unveiled three years later it was crowned the world’s tallest building
Apartments in Downtown Dubai fell by 16 per cent while prices in the world’s tallest building, the Burj Khalifa, were 12 per cent lower than the average in 2017.
In 2010 a one-bedroom apartment in the Burj Khalifa could have been sold for around $800,000, rising to $1 million in 2014 when oil prices peaked at $100-a-barrel.
But today, the same apartment could end up going for less than $550,000, according to Middle East research brokers, Jones Lang LaSalle.
Most of its 900 units were bought before the financial crisis of 2008 and so were sold at the higher prices before the global economic slump.
The report also stated that when prices were compared to December 2017 Meadows and Palm Jumeirah were down 12 per cent, with Jumeirah Park down by around 14 per cent.
Burj Khalifa building in Dubai where apartment prices last year were 12 per cent lower than the average in 2017
Only one island on The World – a man-made archipelago of ‘countries’ – has been completed since construction began in 2008
Developments of luxury hotels and apartments on the artificial palm-shaped island have stalled in recent years.
Arabian Ranches was down by nine per cent and a two-bedroom apartment in Business Bay, which is currently under construction and will have more than 240 buildings when completed, fell by 18 per cent.
Transaction activity in 2018 declined by around 22 per cent, compared to the previous year, as buyers adopted a ‘wait-and-watch approach’, the Savills report said.
The report stated: ‘Supply and demand mismatch led to increasing pressure on asset pricing across the emirate. Both capital and rental values declined across most sub-markets.’
Oversupply of the market has been blamed for the stunted market and experts predict it could take two years to bounce back.
About 31,500 homes are likely to be completed this year, more than twice the city’s average annual demand over the last five years – that compares with 22,000 homes finished in 2018, according to JLL.
Aerial construction cranes operate on top of the Sky View skyscraper in Downtown Dubai, which saw prices fall by 16 per cent
Visitors looking at a scale model of how the Palm Jumeirah in Dubai should look once construction is finished
A total of 96,000 units are currently scheduled to be completed before the end of 2020, with major projects such as Al Khail Heights, Hayat townhouses and apartment buildings on Bluewater Island.
Dubai’s residential values have slid around 25 per cent from the 2014 peak, including a 10 per cent drop last year and JLL said values are expected to decline by 5 per cent to 10 per cent this year.
According to data from Dubai Land Department (DLD), the total value of sales excluding land stood at $3.4 billion (around 12.3 billion United Arab Emirates Dirham) until the end of 2018, which represents a decline of 32 per cent compared to 2017.
A slowdown in global trade and financial markets, as well as weakening neighbouring currencies, also weighed down on demand, the report stated.
The multi-billion pound archipelago of ‘countries’ in Dubai with artificial celebrity-owned fantasy units known as The World
Construction cranes sit above a devlopment area beside a highway in the City Walk district of Dubai in September 2017
The World, an artificial archipelago of various small islands constructed in the rough shape of a world map, only has one island completed since construction began in 2008.
The Island, which is one of the 300 islands that make up The World, is used for corporate events and private parties.
Steven Morgan, CEO of Savills Middle East said: ‘The UAE Government has made a number of bold, innovative changes to stimulate the growth of the economy.
‘Through both public and private sector investment, we envision the UAE will continue its progress towards a diversified economy and a more mature real estate market.
‘There is still some way to go towards recovery but we are starting to see investor optimism return.’
The government’s Land Department has been focusing on promoting Dubai’s real estate to investors abroad, mostly in the US, UK, China, India and Russia.