While rents in Dubai are softening, Suraj Rajshekar, general manager of Rocky Real Estate, says certain segments continue to remain popular. “The Dubai rental market can be divided into two segments: units that come under Dh150,000 and consisting of studios and one-, two- and smaller three-bedders, and properties over Dh150,000,” says Rajshekar. “All properties that are below Dh150,000 have high demand and transactions are happening in most of the communities in the market.”
The drop in rents is also giving tenants more options for a lifestyle upgrade, which ultimately his driving transactions. “The majority of the working-class population in Dubai looks for units in this category, so it will continue to perform well,” he says.
In an interview with PW, Rajshekar talks about trends in the rental market and the growth of institutional investment opportunities.
How has the slowdown in rent impacted tenant movement?
Several tenants are readjusting, taking advantage of the current market’s opportunity to move either towards better amenities or good rents. Some residents feel well adjusted in their present area due to the right schools, friends, children group, etc., hence, they don’t move homes.
We are seeing people moving from older buildings that are not well maintained to better premises with competitive rents. For example, tenants that lived in Al Barsha and renting a one-bedder at Dh70,000 can now to move to Jumeirah Lakes Towers (JLT) for the same cost and stay close to a good community. Similarly, people living in Al Quoz consider moving into Al Barsha to upgrade into a better lifestyle, amenities and rents.
In Dubai, all areas are developed with a unique selling proportion, hence, people select homes based on their preferences. For instance, those living in a vibrant community such as JLT and Dubai Marina will not prefer to stay in the serene and lavish lifestyle of Emirates Living and vice verse. Therefore, every area attracts its own segment of the population that prefers to reside in it due to its offering.
Which areas you would recommend for young couples or families who are new in the country?
The younger population prefers Jumeirah Beach Residence and Dubai Marina that have abundant outdoor and waterside-living amenities — the beach, restaurants, cafes, retail outlets, leisure zones, etc. The young working class also loves JLT because it is a mix of commercial, residential and is close to Marina. Young couples with families prefer JLT and Emirates Living based on their budgets.
Young couples earning half a million and above per year prefer to stay in a fancy apartment in Marina’s urban and lively lifestyle. The couples whose salary is not more than Dh250,000 per year prefer Discovery Gardens, which has affordable, spacious apartments, is closer to schools, has a lot of landscaping and children’s play area, etc.
Are there more people now moving into a smaller units or more affordable rental communities?
I do not see a downgrade in people requirements; the movement in the market is only for upgrading as per their wish list. Tenants are either retaining where they live or moving to get a better lifestyle, but downgrade transfers are not happening in the market.
How has the UAE grown its appeal to attract institutional investments?
Dubai is one of the best real estate investment destinations because it still offers a healthy 6-8 per cent return on investment (ROI), whereas in other established markets the ROI is between 2 per cent and 4.5 per cent. It is a transparent property market that appeals to institutional investors.
Institutional investors wanted to come in the past, and now this place has become an ideal stage for them. We see about half a dozen Real Estate Investment Trusts (REITs) active and operating right now and more are anticipated to come in future, bringing an attractive platform for institutional investors.
Compared to a high-net-worth individual, the institutional investors are more organised and have larger funds and expertise to participate in big transactions. Moreover, REITs can acquire assets at a good price and pass the benefits to investors, offering better ROI, which in turn helps REITs raise fresh funds for further transactions. Also, when such large deals happen in the market, there is no room for a decline in property value. Hence, the institutional investors have a positive effect on the real estate market as a whole.
Are you concerned about oversupply with the new property launches?
There are no oversupply concerns in the market. The current price softening in the market is not due to excessive supply coming in, but it is because of the overall slowness in the economy across the globe. All the recent launches are happening in the affordable segment, which was untapped in the past, but it has many favourable potentials. Dubai is always a great place to invest, and it has proven itself repeatedly.
What is your outlook for the property market?
The market looks good; I think the authorities have virtually addressed and answered all the concerns of the buyers and tenants. We see the sellers are holding on to property; there is a sense of steadiness and calmness in the market. This shows property owners have confidence in the real estate sector.
All developed communities offer better options for investment as they are ready with infrastructure, amenities, etc. Also, the new airport and World Expo 2020 site and areas close to it are prominent because there is going to be a lot of emphasis and activities in those communities. If you enter now, you will receive promising capital appreciation by the time everything is ready in that area.
In the present market, when prices have softened, it is time to get real bargains. Also, the tendency to lose on these types of deals is rare, so it’s safe to buy at this time.
On the rental side, large three- to four-bedroom apartments priced Dh150,000 and above have seen rents softening. Whereas, the fast-moving segment, with prices between Dh50,000 and Dh150,000, has not seen much softening as there is a lot of demand.
I see this trend holding up because there is real demand in that segment and it will remain stable for a while.
