Villa rents soar in Dubai as apartment sector cools

Dubai: Rental rates for villas increased 11 per cent over the last three months, but apartment rental rates grew just four per cent, the latest residential report shows.

Dubai's economy has so far withstood the effects of the financial crisis currently battering other regions of the world, said Andrew Chambers, managing director of Asteco, while releasing its third quarter residential report.

"Dubai's banks and financial institutions are much less exposed, so they have not incurred the losses of many international banks. Also, loans given locally have not shown default that we see in other countries," Chambers told Gulf News.

Demand for villas and apartments in Dubai continues unabated, Chambers said in Sunday's report.

Villa rents increased 25 per cent in Downtown Burj Dubai, which the report attributed to the limited supply of villas in that area.

The average rent for a three-bedroom villa is over Dh305,000 per year, the average rent for a four-bed villa stands at Dh375,000 per year, while the average rent for a five-bedroom villa is Dh465,000 per year.

However, apartment rentals showed a slower growth than villa rentals, at just four per cent, with the apartment rents continuing to slow down in the third quarter.

Trend

The slowdown in apartment rents is expected to continue with more complexes nearing completion, Chambers said. The average rent for apartments in International City was up 13 per cent as the additional retail space is under construction.

Apartment rents in Jumeirah Lakes Towers grew 11 per cent with around 15 residential towers expected to be delivered in the next three to six months, the report said.

Chambers said an increasing number of residents were looking to villas as family accommodation, pushing up demand.

"An increasing number of expatriates especially are discovering the financial and social benefits of owning a villa in Dubai. With more and more expatriates making a long-term commitment to stay in Dubai due to the emirate's reputation as a safe place for families and due to the stable employment climate in the region, many expatriates see buying a villa as a sound investment," Chambers said in the report.

Asteco recorded a 24 per cent increase in villa prices since the last quarter. While average prices for one to three-bed townhouses ranged from Dh1.6 million to Dh3.8 million, the average price of a villa starts at a cool Dh4 million and goes up as high as Dh8 million for a five-bed villa.

Area-wise, Downtown Burj Dubai witnessed the highest increase in villa prices, of 61 per cent.

There was a rise of 42 per cent in villa prices in Palm Jumeirah, 39 per cent in Palm Jebel Ali and 35 per cent in Emirates Hills.

Apartment sale prices, however, appreciated by 20 per cent compared with last quarter. Discovery Gardens area had the highest growth, as units are being handed over, with a 39 per cent rise in prices.

International City saw a 31 per cent growth in apartment sales prices. Both developments have benefitted from "considerably low launch prices", the report said.

In August, Morgan Stanley predicted a 10 per cent drop in Dubai's house prices by 2010, causing panic. They had attributed the drop to oversupply of housing.

However, other analysts had disagreed at the time, saying over 40,000 units are needed to keep up with demand triggered by the population growth.

Chambers said they expect a "levelling-off" in price increases in some areas and thus they don't expect any major increases in the next year or two.

With reference to the many mega-developments underway, Chambers said liquidity is not an issue for major developers.

Do you think Dubai still needs a rent cap? Have you received a notice from your landlord for renewal of contract? Was there a hefty increase in rent?

There is currently a massive exodus of expatriates from villas to apartments due to ridiculously greedy rent demands. Many of those villas are actually empty because landlords cannot find new tenants who can afford to pay Dh350,000 in advance in one cheque. Why do people persist with this insane system of paying vast sums of rent in advance?
Bill McCabe
Dubai,UAE
Posted: November 03, 2008, 14:52

Having a rent cap is very important. Two months ago the owner closed the building we lived in. Apparently, he closed it with the approval of Dubai Municipality without an explanation. A month later, I found out that the building was up for rent again and the studio flat that I was renting went up to Dh85,000 annually. This is just another way of cheating people. Now, I am renting a studio for Dh60,000.
A Reader
Dubai,UAE
Posted: November 03, 2008, 13:50

After returning from our summer vacation we found out that there was a Dh50,000 increase on our accommodation and an additional Dh5,000 for elusive maintenance. If that is not enough, three weeks later a notice was put up for us to vacate the premises within three months. Landlords who do such things should be stopped.
Sean Bradley
Dubai,UAE
Posted: November 03, 2008, 13:33

The majority of middle-income employees cannot afford to live in the luxury villas or the impressive towers that are appearing like mushrooms after rain. Therefore, they are trying to shift to cheaper surrounding emirates where the rents are much more affordable. Last month I received a contract renewal request where the increase was far more than the legal limit. Not only that, there were new charges, such as maintenance and parking spaces, that were added out of the blue.
Claudia
Dubai,UAE
Posted: November 03, 2008, 12:36

Recently, I was looking to move from a studio flat to a one-bedroom apartment and unfortunately the price for such apartments have risen from Dh50,000 to Dh85,000 annually during the last five months. I do not think this is fair. Will rent prices ever go down?
Minas Terzian
Dubai,UAE
Posted: November 03, 2008, 11:24

The main concern raised in this report is the rent cap. However, there are other factors like the evacuation of people living in shared villas. I do not think the problem is the availability of apartments and villas in Dubai, it is the fact that it is not affordable.
Tabassum
Dubai,UAE
Posted: November 03, 2008, 10:17

Dubai definitely needs the rent cap. Due to the financial slowdown many individuals and families are on the verge of giving up and going back to their home countries. Removing this cap or allowing a landlord to dispute the annual rent on a property will only make things worse and will push people to search for opportunities elsewhere.
Khalid
Dubai,UAE
Posted: November 03, 2008, 10:16

The current price level of rent is not sustainable, even for people with high-income. I think if the rent does not go down significantly, then the Dubai we know will become empty.
Yves Basquet
Dubai,UAE
Posted: November 03, 2008, 09:01

Not only should there be a rent cap but also strict laws prohibiting landlords from harassing tenants by serving illegal notices to vacate properties. Landlords end up getting the maximum rental increase while preventing tenants from complaining to the rent committee.
Farrukh Iqbal
Dubai,UAE
Posted: November 03, 2008, 08:05

It is good to see that someone is gathering statistical data on the rents of villas and apartments. However, what bothers me is that I have not read anything on other occupancies. The report talks about three-and-four bedroom accommodations but what about the prices of studio flats in Al Karama that are already up to Dh80,000 annually? I think the authorities will have to look into that if they want the 'one family, one villa' plan to work.
Vanni
Dubai,UAE
Posted: November 03, 2008, 07:42