The average residential sale prices in Dubai, UAE, which registered a sharp drop in the first half of 2016, are likely to fall further in coming months, thus reflecting a transition to a more mature market, said a report.

The emirate’s residential and hospitality markets have rebalanced towards a 'new normal' in the first six months of 2016, stated a new report by top consultancy Deloitte.

The residential sale prices will drop further, but the rate of decline will slow, as value and affordability returns to the market, according to “Deloitte Real Estate Predictions 2016 – H1 Review.”

"Our real estate advisory team issued a Real Estate Predictions Report in January 2016, which looked at trends and prospects for Dubai’s real estate market,” remarked Robin Williamson, the managing director, Deloitte Corporate Finance Limited, Middle East.

"Now that we have moved into the second half, we have compared the predictions made for Dubai’s residential, hospitality, office and retail markets with actual trends in the first half of 2016," he stated.

According to Deloitte, one of the key macroeconomic factors shaping Dubai’s residential market in January was low oil prices.

Data for the first six months shows that prices for Palm Jumeirah apartments declined by 3.8 per cent between January and June this year, while prices for Downtown apartments declined by 1.8 per cent over the same period.

Year-on-year data indicates that overall, residential sales prices in Dubai declined by 3.8 per cent in June over the same period in 2015.

On the future outlook, Deloitte predicted strong levels of demand for serviced apartments in Dubai driven by increasing visitor numbers from key source markets, growing visitor demand for longer average lengths of stay and better value accommodation.

On the office market, Deloitte predicted that completions of a number of new office schemes could lead to a slowdown in rental growth in some submarkets, with the power of negotiation shifting from landlords to tenants.

In the first half, there were two significant completions in Business Bay: B2B Office Tower (with a GLA of approximately 242,000 sq ft) and Westbury Square (with a GLA of approximately 323,000 sq ft).
During this time, average rents for offices in Business Bay fell by approximately four per cent.

Moreover, in line with Deloitte predictions, data from Reidin shows that average office rents in the Internet City and Media City Free Zones were slightly up in the second quarter of 2016.

Core locations in DIFC also continue to perform well; there are waiting lists for space in most institutionally owned buildings, while Gate Village 11 (which is currently under construction) is reported to be 100 per cent pre-leased.

“We anticipate that these trends are likely to continue in H2 2016, with further completions in secondary locations giving tenants greater negotiating power,” stated Williamson.

"In Free Zones, we anticipate that factors such as high quality infrastructure and more accessible public amenity provision will continue to drive demand from corporate occupiers," he added.

On the retail market, Deloitte said the moderation in sales growth would continue through 2016 against a strong dollar and economic uncertainty in key source markets.

In the first half, data from grmc indicates that the majority of people expect to have either the same or less disposable income (69.8 per cent) in 2016 than the previous year. Retail sales are unlikely to return to growth until disposable incomes rise.

Also, in line with Deloitte’s predictions on prime malls’ rental growth, Emaar Malls PJSC reported a 13 per cent increase in rental income for the same period over last year, with reported increases of 25 per cent on base rents for units within super prime malls such as the Dubai Mall.

“We predict that a return to higher oil prices combined with robust tourism and population growth, are likely to support a return to growth in retail sales from 2017 onwards,” stated Williamson.

“We also anticipate that new retail concepts, such as Boxpark and Citywalk, are likely to perform well as retailers seek to diversify from traditional mall offerings,” he added.-TradeArabia News Service