DubaiI: As rents continue to slide in some Dubai areas, residents are wondering if we're seeing rock bottom or there's more to come.
A one-bedroom unit at International City is now offered for Dh25,000 (60 per cent off the peak) while a similar unit at the Discovery Gardens was being advertised this week for Dh35,000, down from its peak of about Dh75,000.
So is this the new rock bottom? "It's hard to say. I've stopped making forecasts," said Ryan Mahoney, managing director of Better Homes, Dubai's leading real estate brokers and facilities managers.
"International City is a special case because of unresolved problems like sewage flow in some parts. Unfortunately, it's been poorly maintained."
Mahoney said some areas, even within the township, such as the central business district, remain "vibrant and popular". "There are great deals to be had and the leasing front is still active in areas that are nicely maintained such Dubai Marina, Downtown Dubai, The Meadows, Arabian Ranches and The Springs. But some areas are almost entirely vacant, with a real fall in price and lease rates."
In 2010, lease rates declined across Dubai irrespective of quality and location, with the lower-quality buildings and less prestigious locations experiencing the steepest declines.
Property think-tank Landmark Advisory attributes this drop to deliveries peaking in 2010. Fewer deliveries are expected in 2011.
Studio flats at International City are now being offered for Dh16,000 to Dh18,000 a year, while studios at Discovery Gardens now go for under Dh30,000 and in Al Warqa they lease at Dh22,000 — about half of their peak in 2008.
Charles Neil, CEO of Landmark Properties, said location and quality are key factors in both the rental and property sales market.
"There will be oversupply, but this will affect areas where developments are of poorer quality and location may not be favourable. Lease rates in some new areas where handovers are taking place are expected to further decline in 2011," said Neil. "But in the more established areas such as Emirates Living, Downtown Burj, villas, coastal properties and good-quality developments, lease rates are unlikely to decrease further."
"The areas that will see further price falls and rental declines will be with respect to the new properties being handed over, where owners may be struggling to meet final payments — and the surrounding areas still look like building sites," said Neil.
Meanwhile, investors are horrified to see rent and price declines on their property.
A Reuters survey of 15 analysts reported in January that Dubai property prices could dip by another nine per cent from now through to 2012, while Abu Dhabi may see prices drop by 10 per cent in 2011 on the back of an average 45 per cent drop in the last two years.
In 2005, P. Bharat Singh, an Indian executive, took a mortgage to purchase a one-bedroom unit from developer Nakheel at International City for Dh410,000. Units similar to his, however, are now on offer for between Dh260,000 and Dh295,000 - down 36 per cent and just a third off their peak price in 2008. "This means that I'm unable to get my money back if I were to sell it now," said Singh.
Penny, a Filipina IT executive, bought a 485 sq ft studio unit for Dh290,000 in the same development in 2006. Now, a similar unit is advertised for just Dh185,000 — 35 per cent less.
Penny, however, is sanguine about it all: "What comes down must go up."