Dubai: The cost of renting apartments and villas around Dubai fell at a much faster rate in recent months, a property analyst has said.
According to a review by Phidar Advisory, accommodation costs across properties in the emirate posted the biggest quarterly decline in October since the slowdown started in the middle of 2014.
The decline continued to hit many communities, including popular areas like Downtown Dubai, where rents dropped by 5.2 per cent at the end of October.
“Rent declines are escalating, largely driven by the combination of weak job growth, new supply handovers and reduced housing budgets,” Jesse Downs, managing director of Phidar Advisory, told Gulf News.
“Wider corporate restructurings and salary adjustments have reduced housing budgets, which exacerbates rent declines and will lead to a reshuffling of pricing.”
The analysis coincided with the trend shown in the Reidin Residential Rental Price Index, which fell from 92 in August 2017 to 90.4 in October 2017. In its most recent report, Core Savills also highlighted that rents for flats in Dubai registered more declines than villa properties.
“The core submarkets of Dubai Marina and the Palm Jumeirah were the weakest performers, with rents dropping by 10 per cent year-on-year. Occupiers across these areas either negotiated lower rents or chose to move to cheaper comparable units.”
Rents for apartments had dropped by only 0.9 per cent in August, according to Phidar, but the pace picked up to 2.6 per cent in September and 3.8 per cent in October. For townhouses and villas, rents fell by 1.1 per cent in August to 2.7 per cent in October.
“It has been escalating. In fact, for apartments, October’s data shows the biggest quarterly drop since the market started to decline in mid-2014,” said Downs.
Despite the rental declines in many areas, including those in the city centre, tenants who are constantly on the lookout for ways to save money on accommodation costs continue to move farther away.
“The new housing, often in outlying areas, is drawing relocation from key existing communities, which is driving up vacancies in some of the traditionally most popular areas,” said Downs.
However, there are still some landlords out there who are hesitating about lowering their asking prices. Downs said this is leading to “long void periods and lost income.”
“In many cases, it’s more rational to reduce the rent and fill the unit. Landlords often think their units in popular areas are immune, but nothing is fully immune now.”
“Rents across the city are interconnected. From studios to villas, central locations to the suburbs, everything is interrelated, to some degree. Eventually, rents will adjust downward in all areas and the market will reach a new equilibrium. Sometimes it takes a few months, or more, to find the equilibrium, “ she said.
