Dubai residential transactions still slow

DUBAI: Residential transactions in Dubai are still slow and prices have continued to decrease on last quarter, although sales volumes have improved since the last quarter, the Cluttons Dubai Property Market Update reported.

Citing Propertyfinder, it said the majority of applicants currently had budgets capped at AED1.5 million (RM1.25 million) per property. Furthermore, only 5.9% of users are even considering listings above AED 1.5 million.

The improved sales volumes are due to the attractive rates offering by mortgage lenders to credit-worthy clients wishing to purchase quality stock.

"The market down turn, however, has its positives, including increased affordability and better quality listings which has introduced market maturity into Dubai's real estate sector. As to quality and affordability, buyers now have the option to upgrade to a better quality unit in a more desirable location. Those who initially looked to buy a property in The Springs, for example, can now afford a property in The Lakes," it added.

The leasing market has seen an increase of activity in September, Cluttons Research said, as new families located to Dubai and existing families either renewed or upgraded to better residential facilities before the start of the new school term.

The leasing market then moved into a period of calm from October to December, but the research house expects to see some activity again at the end of the year when some employment contracts expire, and this will serve to clarify where the rental market is heading.

Office rents, meanwhile, have continued to fall across the board due to increased supply. Transactions have been fuelled by existing companies looking to relocate and take advantage of cheaper rents in areas which once may have been out of their budget.

The research house added that as multi national companies start to reconsider Dubai due to affordability, the key to medium term success is focusing on quality property maintenance and fostering the tenant-client relationship through a flexible approach to leasing.

"However, in contrast to previous quarters, we are also starting to see a slow migration of large multinational firms into Dubai once again. This may be signaling that better times are ahead for the Emirate," the report stated.

Cluttons Research expects to see high levels of rent-free periods along with longer term leases of three to five years, on the reduced rents and regular payment terms.

"As new supply continues to be introduced to the market and rents continue to fall, landlords who have fared the best throughout 2010 have been those who have been willing to be flexible when negotiating new leases and lease renewals," it said.

It added that landlords who have been slow to react to falling rents by offering incentives and not focusing on good property management have seen vacancy rates rise. Additionally, those landlords who have not considered tenant mix and tenant quality have seen increasing levels of vacancy as tenants relocate to the better let buildings.