Dubai: Hit by sharp and substantial hikes on their rentals, budget-minded tenants in Dubai need to make up their minds quickly on what their options are. They could decide to buy an “affordable” property of their own or head for locations where rents still have not yet shot up to levels they are facing now. But those options are narrowing by the week.
“The race for affordable locations have seen values and rentals in International City and Sharjah high-rises being forced up quite significantly,” said John Stevens, managing director at Asteco Property Management. “The pace of re-locations is driving the rental market, and from a tenant’s affordability perspective the ceiling could be hit soon.”
It sure does, when the landlord of a one-bedroom can demand Dh55,000 for a one-bedroom in Discovery Gardens, for instance, and get it. It used to be Dh30,000 in the not too distant past.
For someone who wants to buy an affordable place rather than rent, it is getting ever more difficult to balance expectations with the investments this would entail. “Potential buyers became increasingly reluctant to purchase properties at peak prices and turned their interest to secondary areas that had a lower asking rate, or to off-plan properties with attractive payment plans,” says Asteco in its first quarter overview of the Dubai realty trends.
Compared with a year ago situation, “The increase in sales prices came from less established areas, whereas communities with higher than average sales prices remained stable in the last quarter (first three months of 2014).
“Many deals failed to transpire as sellers, with genuine offers, withdrew from deals as they predicted further growth. Furthermore, transactions were also slower in established areas as prices were beyond what buyers were willing to pay. In addition, the new law regulating loan-to-value ratio to buyers applying for mortgages was implemented resulting in a higher cash requirement when purchasing a property”.
None of which makes it any easier for buyers with a limited budget.
“Mortgages that are occurring are at the higher end of the price spectrum, implying that for the most part, the middle-class is still not participating in the ‘wealth effect’ of rising prices,” said Sameer Lakhani, managing director of Global Capital Partners, an investment group which is building up a land bank in Dubai. “On the contrary, with rising rents taking a larger percentage of their monthly budgets, many are being forced into neighbouring cities of Sharjah and Ajman.”
Rent hikes certainly are starting to bite deeper.