Dubai: There is light at the end of Dubai's gloomy rental tunnel as the slowdown in residential rates continues.
This is certainly good news for Dubai's large population, increasingly frustrated by rental increases stretching their wallets.
However, while no significant residential rental increases were seen over the last three months, year on year average residential rates in Dubai rose nearly 22 per cent, Asteco's quarterly report says.
Matthew Green, research manager at Cluttons UAE, said, "Although current rental growth is lower than it was two years ago, the figures are still extremely high and for many, unmanageable. Unfortunately, we don't see any significant decline in growth rates over the next years as supply will again fail to satisfy pent-up demand.
"Rental growth for apartments has been somewhat overshadowed by the villa market where an acute shortage has fuelled huge rises," Green said.
Indeed, an Asteco report shows that rental rates for villas in Dubai continue to increase, posting a 20 per cent rise compared to the previous quarter.
"Increase in villa rents is the direct result of continuing undersupply of villas and townhouses compared to growing demand from UAE nationals and well-earning expatriates," Andrew Chambers, managing director of Asteco, said.
Chambers said mega-projects such as Dubailand, Dubai Waterfront and Jumeirah Golf Estates will help ease the undersupply over the next two years.
Liz O'Connor, head of leasing at Better Homes agrees that they do not expect residential rates to drop and have actually seen an increase during the first and second quarters of 2008.
"There is stability, of course, created by the rent cap for tenants in existing properties. However, when looking at properties for lease on the market, rents are still on the increase in many areas, mainly due to lack of supply of properties for rent," O'Connor said.
More supply
O'Connor said they are hopeful these will start to stabilise as more developments are handed over.
The report shows Shaikh Zayed Road is one of the most popular locations, unsurprisingly, recording the highest annual rental growth of 51 per cent.
Bur Dubai followed, in spite of constant traffic problems, with yearly rent increases of 42 per cent. Qusais saw increase of 40 per cent as it has less congestion and good accessibility to the airport and major roads.
"Occupancy rates in Bur Dubai are extremely tight-between 90 to 95 per cent. Oweing to its relatively affordable rents, most tenants tend not to move out resulting in a shortage of reasonably priced units and pushing rents up further. "With availability coming only from new buildings, landlords are dictating higher prices to desperate home-seekers," said Chambers.
