The first quarter of 2015 recorded further growth in the residential rental and hospitality sectors while the residential sales, retail and office sectors remained stable. Following the decline in oil prices, we expect there to be a reduction in government spending this year which will slow down the pace of demand growth. On the other hand, the short-term supply picture is generally constrained leading to relatively stable market conditions.
Residential Rental growth continued at 4% during Q1 2015 (following 11% growth in 2014) – due to limited quality supply across all price points and the rent cap having been removed. The Residential Sales market remained stable (following 25% growth during 2014) due to a decline in investor sentiment following the reduction in oil prices.
The Office market remained stable following two successive quarters of recovery and growth – with demand remaining relatively flat and limited supply completions. Vacancy rates for office space are expected to remain stable this year given that a significant amount of the new supply in the pipeline is pre-committed.
The Hospitality market was the strongest performing sector this quarter, driven by wide-ranging government initiatives to boost tourism. While Dubai registered a slowdown in the hospitality market this quarter.
Market SummaryNo major deliveries took place during the first quarter of 2015. However, approximately 5,000 residential units are expected to enter the market by the end of 2015, dominated by the delivery of The Views (Saraya), Hydra Avenue and The Wave (Al Reem Island), C59 (Rawdhat) and Amwaj 2 (Al Raha Beach). While sale prices in Dubai have declined, Abu Dhabi’s sale prices for residential units (apartments and villas) remained stable during Q1 at approximately AED16,000 per sq m. Rents for prime 2 bedroom apartments continued to increase this quarter given the limited supply in the market, registering a 4% increase to reach approximately AED 163,000 p.a. There remains a shortage of quality supply across all price points and an acute shortage of affordable housing