Saeed Hashmi, Head of Valuation and Advisory at Landmark Advisory
Today, Landmark Advisory, one of the leading real estate consultancy companies in the Middle East, released its Quarterly Report for Q4 2010, indicating that capital values across all segments of the market in both Dubai and Abu Dhabi continued to decline during this period.
In Dubai’s residential market, more supply – adding to the already large oversupply – will continue to put downward pressure on capital values. Mr. Saeed Hashmi, Head of Valuation and Advisory at Landmark Advisory, a division of Landmark Properties LLC, explained, “this issue will be exacerbated due to the fact that 2010 saw significant postponements in delivery with roughly half of the 50,000 or so units we had expected to be handed over, delayed”. The result was that over the quarter, capital values declined by 5.8% and 1.4% for apartments and villas respectively, with rents declining by 7.5% and 3.4%.
Nevertheless, Mr. Hashmi affirms that while capital values did decline, there was actually a significant spike in apartment leasing volumes across the quarter due to a combination of relocation demand from other Emirates in the UAE, coupled with people within Dubai looking to take advantage of declining rents.
In Dubai’s office market transactional activity remained slow, away from a select few high-profile Grade A assets in prime locations caused by significant barriers which continue to prevent any sustained increase in transactional activity. Furthermore, according to Mr. Hashmi, ‘Capital value declines due to oversupply are stymieing the amount of potential purchasers into the market and while it now makes sense for companies to consider owner-occupation, liquidity constraints are preventing this being witnessed on a large scale’.
In Abu Dhabi, as Landmark Advisory have asserted in the past, it is impractical to try and analyse the residential market in isolation. As such, while the market is in fact currently undersupplied, it continues to behave as if it is oversupplied. Mr. Hashmi explicates further,declaring‘newly created demand in Abu Dhabi is contingent on other markets, most notably Dubai’s. Thus, capital values and rents are falling’.
Transactions levels in the Capital remain low.However, Q4 was ‘a transitional quarter’ for Abu Dhabi, as asking prices finally started to reflect reality, down in some developments up to 17% compared to Q3. Rental declines were also witnessed, with a 6% decline – resulting in a cumulative fall of 31% over the year. As seen in previous quarters, the steepest declines occurred off-island and in low quality areas.
Office sales in the Capital remained almost non-existent, with MrHashmi describing this segment of the market as ‘being in hibernation, waiting for deliveries to occur, so that potential purchasers can adequately assess the state of the market before committing to any transactions.’
Mr. Hashmi concluded that while capital values and rents continued to fall in Q4 2010, sentiment overall has improved and there are signs of investors reconsidering the UAE, in particular Dubai, as a place to invest again, while proclaiming, “we expect in 2011 that Dubai’s residential market will bottom out in certain areas and renewed interest to ensue”.