Dubai: Have you seen your apartment rent go down by 10 per cent or more in the last 12 months? That’s the average rental drop in the Dubai residential property space during this period.
This allows a tenant to lease a studio in Business Bay from Dh40,000, and at Dh35,000 and over if the location preference is for Dubai Marina.
A single-bedroom unit in the Greens could be had for Dh50,000. At all three locations, rents are down 11-12 per cent in the 12 months to end September, according to the latest report from Asteco. Across Dubai, this has been the rental declines based on listings or tenancy contracts. In the third quarter alone, the average dip was 3 per cent.
These rentals are based on prevailing trends in these residential clusters. There could be variations on these based on the building, its relative age, amenities, etc. But these days, it’s rare to find a tenant who has not benefited from a downward revision of his annual rental outgo. No neighbourhood has been immune to the pull.
And more handovers in preferred residential hotspots should lead to renewed pressure on rental terms decided between landlords and tenants. “This trend is likely to solidify due to the sheer volume of supply expected for handover in the short to medium term,” Asteco notes.
For the record, Dubai has seen a 35 per cent dip on the residential side since the second quarter of 2014. That was the time when rentals had zoomed to a six-year high after the 2009 downturn.
At the time, rentals were hugely inflated as Dubai was yet to see the steady completion of new projects. Landlords could demand and get what they wanted.
A better comparison for today’s rental rates should be with early 2017, by which time more the market had seen the last of the super-inflated rental terms. Between 2017 and now, rents would have dropped around 20-22 per cent.
But it need not be a given that tenants can get landlords to meet all their demands on rent cuts. “While the softening market conditions are good news for residents, it is important to note that securing reduced rents requires negotiating skills from the individual tenants … and a willingness to move should the landlord prove unyielding,” the report adds.
“Residents also need to assess the financial benefits of discounts/incentives against the cost/stress of moving. While in many cases the scale tips in favour of the latter, a growing disparity will likely lead to increased tenant relocation in the face of intransigent landlords.”
At the end of the negotiations, what matters is how desperate the landlord is to secure a tenant. Because there’s ample proof that if they do not drop their asking rates, interested tenants can just head to the landlord of their neighbouring property and get a sweet deal.
According to one tenant who recently signed a contract for an upscale villa, much depends on the landlord and his/her estate agent. “My initial experience dealing through an estate agent was dismal — the demand was for Dh180,000 plus. The landlord was an overseas investor and all negotiations had to be done through the agent.
“But just waiting for a month yielded a tenancy for Dh160,000 for another villa in the same cluster. That’s because I could have a direct communication with the landlord.
“In this current market situation, everyone needs to get realistic.”
Flood of new supply
Asteco reckons full-year delivery to total “just over 20,000 apartments and 7,500 villas in 2019. Whilst these figures represent a marked decline on previous projections, it is still a significant volume and a notable increase from 2018, which recorded deliveries of 12,000 apartments and 2,750 villas.”
The report states that handover volumes actually declined in the third quarter — to 4,600 units compared to over 5,000 in both the first and second quarters.
It’s all getting affordable
Head to Jumeirah Village and chances are you can get a brand new — or reasonably new — studio for Dh25,000 plus a year. In International City, the asking rate starts from Dh18,000, while Discovery Gardens and Sports City studios start from Dh24,000, Asteco reports.
Apartment rents in Sharjah and the Northern Emirates recorded average quarterly and annual declines of 3 per cent and 11, respectively. The dip in Sharjah and Ajman was “exacerbated by the increase of supply in those emirates, coupled with the continuous delivery of affordable properties in Dubai.”