DUBAI, July 20 The rise of Dubai's red-hot
residential real estate market is slowing as government steps to
curb speculative buying have an impact and higher prices start
to affect demand, consultants JLL said in a report on Sunday.
Second-quarter trends in the market suggest the risks of the
Dubai property market overheating and then crashing, as it did
in 2008-2009, are easing, Craig Plumb, JLL's head of research
for the Middle East and North Africa, told Reuters.
"It's good news that the market is slowing down," Plumb
said, adding that when the market eventually reached the falling
phase of its cycle, the pull-back was unlikely to be as violent
as it was five years ago, when it triggered a corporate debt
crisis in the emirate.
For now, the residential market is still climbing rapidly;
average sale prices jumped 36 percent from a year earlier in the
second quarter, compared to 33 percent in the first. Rents
gained 24 percent, after 23 percent in the previous quarter.
But on a quarter-on-quarter basis, rises are slowing. Sales
prices grew 6 percent in the second quarter, down from 10
percent in the previous quarter, JLL calculated. The increase in
rents dropped to 3 percent from 7 percent.
Seeking to avoid another boom-bust cycle, authorities took a
series of steps last year to cool the market. The United Arab
Emirates central bank imposed caps on mortgage loans, and Dubai
doubled its transaction fee on property deals.
Plumb said these steps were having an impact and in
addition, market forces were at work as, with prices in many
areas back near their pre-crash levels, some buyers started to
question the affordability of prices.
While apartment prices have continued to rise, prices of
existing villas in particular have started to lose steam, with
anecdotal evidence of a drop in asking prices that looks set to
continue in coming months, he added.
The cooling of the market can be seen in falling sales
volumes for all residential sectors, with Dubai government data
showing villa sales shrank almost 50 percent from a year earlier
in May, JLL said.
Plumb said that while the residential market as a whole
still had further growth ahead of it, and was unlikely to turn
down for at least six months, it had entered a period of slowing
rent rises that would precede a phase of falling rents.
Other parts of Dubai's property market - hotels, retail
space and offices - are further back in the cycle and remain in
phases of accelerating rental growth, the JLL report said.
High vacancy rates and plans for future supply continue to
constrain the office market, even though rents have been rising
modestly, the report found. Dubai remains one of the world's
strongest-performing hotel markets, with average occupancy rates
around 85 percent in the year to May.
(Reporting by Andrew Torchia; Editing by Olzhas Auyezov)