The addition of new stock, tough macroeconomic conditions and moderate population growth are set to place further pressure on property sales prices and rental rates in Dubai, according to a new report.

Chestertons MENA said overall sales prices for apartments and villas softened by 5 percent quarter-on-quarter in Q1, denoting the highest quarterly drop in sales prices for apartments since 2014.

Its Q1 report added that rental rates for apartments and villas fell by 2 percent, with the Greens, a standout performer in recent years, falling by 4 percent. The villa market, notably Palm Jumeirah also fell by 4 percent.

“As a result of falling sales prices, many end users took advantage of the increased affordability of completed units, as evidenced by the 10 percent increase in recorded transactions from the previous quarter. This was to the detriment of off-plan transactions, which although they still dominate the market, volume declined by 19 percent,” said Ivana Gazivoda Vucinic, head of consulting and valuations and advisory operations, Chestertons MENA.

The most popular areas in terms of completed unit transaction volumes were Dubai Marina, Dubai Sports City and International City while the majority of off-plan units transacted were located in Business Bay, Meydan City and Jumeriah Village Circle.

From an apartment sales perspective, Business Bay and Silicon Oasis saw the steepest declines at 9 percent with prices dropping to AED1,178 and AED729 respectively per sq ft, said Chestertons.

It added that Dubai Sports City, Jumeriah Village Circle and The Greens witnessed a drop of 8 percent while Dubailand proved to be the most resilient community with a drop of just 1 percent, owing to the relative affordability of the area.

In the villa sales market, all communities experienced falling prices, with Palm Jumeirah and the Meadows and Springs recording capital depreciation of 8 percent.

“The number of new launches dropped during the quarter, which appears to be a strategic decision by developers in a bid to stave off empty units or sales at reduced-price points. However, with a substantial pipeline of stock due to be released ahead of Expo 2020, sales prices are expected to drop further this year,” added Vucinic.

In the rental market, The Greens witnessed the greatest decline in apartment rents, dropping 4 percent, closely followed by Business Bay, International City, Jumeirah Village Circle and Motor City, all of which declined by 3 percent.

Villa rents saw the highest decline in Palm Jumeirah at 4 percent followed by a 3 percent decline in Arabian Ranches and Victory Heights. Jumeriah Golf Estates was the only community not to witness any decline.

“The decline in rental rates has been partly due to the additional stock added to the market in the last quarter, in addition, due to falling sales prices, we have seen a number of expatriates choosing to become a home owner which in turn is naturally having an adverse impact on the rental market,” said Vucinic.