Thousands of homes under construction in Dubai are being put on hold as property prices in the emirate continue to fall and rents start to sink.
Between 4,000 and 5,000 homes that were initially scheduled for handover in the second half of this year have been delayed for at least another year to 18 months as the Dubai property market continues to soften, said JLL, a property broker.
JLL said 1,700 homes had been completed in the third quarter, increasing the total residential supply to 452,000 units.
Another 45,000 homes are expected to be delivered over the next two years.
JLL said average apartment prices in the city fell 11 per cent over the past year because of the strong dirham, higher sales transaction fees and mortgage caps.
Apartment prices slid an average of 3 per cent between July and September from the previous three months.
Sales prices for villas fell 7 per cent year-on-year and 3 per cent quarter-on-quarter.
Housing rents in the emirate, which had proved more resilient than sales prices, have also started to decline.
JLL said that after about a year of remaining steady, average apartment rents in the city dropped 1 per cent in the third quarter and villa rents fell 2 per cent.
The broker predicted that average housing rents in the city would continue to fall by as much as 10 per cent over the coming 12 months.
“We expected rents to fall sooner than they did, and actually we are surprised that they held up for so long,” said Craig Plumb, the head of research at JLL’s Dubai office. “We don’t believe that there is one trigger for the fall in rents at the moment, but we expect it has a lot to do with a slowdown in the overall economy, meaning that employment growth has not been as strong as it was.
“With oil prices staying lower for longer than was at first anticipated, the Government has been cutting back spending, which has led companies to be a bit more cautious with their hiring.”
At the start of the year JLL predicted that average house prices would fall 10 per cent this year as the market experienced a slowdown following the dramatic boom, bust and boom of the previous decade.
JLL last week revised its forecast for the year, predicting that average house prices would fall 15 per cent throughout this year.
Last month, CBRE predicted that property price drops would continue next year after average Dubai prices fell 6 per cent in the year to the end of August, while Knight Frank reported that the Dubai residential property market was one of the worst performing in the world in the second quarter of the year, with greater price slumps than Greece, China and Ukraine.
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