Only new supply of homes can dent Dubai rents

Dubai

Dubai’s residents will need to wait until year end to find out whether more supply equates to landlords cutting rents on older properties. Just over 17,000 new home are likely to be added this year going by the pace developers attained in the first three months, when 3,000 plus apartments were handed over.

“A combination of new supply and tenants taking advantage of competitive rates has resulted in landlords offering more flexible terms either by increasing the number of cheques or, in some instances, offering rent-free periods,” said John Stevens, Managing Director at Asteco, the property services firm.

Residents had similar expectations in each of the last two years, but limited handovers ensured the breakthrough did not come about. And where there were declines in asking rents, it was mostly confined to the high-end locations.

Arabian Ranches recorded an annual decline of 14 per cent and a quarter-on-quarter drop of a fairly steep 9 per cent, according to Asteco’s first quarter report for this year. A three-bedroom is now available from Dh125,000 to Dh200,000.

In Jumeirah, annual decrease of 15 per cent and a 7 per cent quarter-on-quarter drop was apparent, resulting in rents for a three-bedroom now ranging from Dh150,000 to Dh230,000. The Lakes, meanwhile, saw little price movement with a nominal decline of 1 per cent quarter-on-quarter and rents for a three-bedroom ranging from Dh170,000 to Dh250,000.

Among more affordable communities, Discovery Gardens ended up being the only area to see some gains with an annual rise of 3 per cent.

Apartment rental rates declined 3 per cent on average quarter-on-quarter and 8 per cent over the year, as per Asteco findings.

“High-end properties were most affected with Palm Jumeirah witnessing price decreases of 7 per cent quarter-on-quarter and 14 per cent annually,” the report adds. “In DIFC there was no movement for quarterly prices; however, annually the figure dropped by 9 per cent.

“Mid-market apartments followed suit, witnessing quarterly and annual declines of 3 per cent and 12 per cent in Business Bay and 2 per cent and 4 per cent in Jumeirah Lakes Towers.”

“Sales prices in many communities are fluctuating and are not expected to stabilise until rental rates bottom out, which is not expected to happen until later this year or early 2018,” Stevens said.

In the villa rental market the trend was similar to apartments with declines of 3 per cent quarter-on-quarter and 8 per cent annually as “tenants took advantage of increased availability of competitively priced properties”.

BOX - Dubai’s freehold communities continue to record fluctuations

* Those locations with limited future supply recorded marginal increases. Villa sales prices in The Meadows and The Springs were up 8 per cent and 5 per cent respectively from first quarter of 2016.

* But Downtown Dubai and Dubai Marina saw year-on-year decreases of 7 per cent.