House prices in Dubai fell by four percent in the second quarter, according to the latest data from real estate consultancy Colliers.
The agency said that this was the first quarter-on-quarter contraction to be reported by its index in twelve months, adding that “forthcoming housing supply and declining rental incomes are likely to put downward pressure on house prices moving forward”.
Colliers had previously reported that its index had risen by two percent in the first quarter in comparison to the final quarter of last year.
The consultancy is predicting that around 33,000 new units will be released onto the market by the end of the year, less than its original estimate of 41,000 due to project delays or rescheduling.
“There are already more than 340,000 residential properties in Dubai with an average occupancy rate of 87%, with further declines anticipated,” said Colliers International’s regional director, Ian Albert.
“The market simply cannot absorb the additional supply unless the population grows and/or the release of stock is slowed down.”
Albert also warned that a dramatic drop in rents made home ownership a less attractive option for investors in terms of income generation, another factor that was weakening demand.
The report also indicated that rigid mortgage approval processes from cautious banks meant that access to finance for some buyers remains limited.
Colliers’ index is compiled using actual mortgage transaction data from a consortium of financial institutions. The data also shows a seven percent increase in overall house price values year-on-year, and the total number of property transactions rose by fifteen percent quarter-on-quarter.
The index slipped 5 basis points from 119 in the first quarter to 114 in the second, while the blended average house price for the second quarter was approximately AED 1,014 per square foot ($276), down from AED 1,061 ($289) per square foot in the first quarter.
Apartment prices dropped by five percent, villa prices by three percent and townhouses by eight percent, all in comparison to the last quarter