Rent hike in Dubai ‘slowest’ since April

Dubai: The rental market in Dubai is showing signs of cooling down, with real estate agents reporting a “modest rise” in newly agreed rental prices, a new report from a UAE-based bank said.

In its Dubai Real Estate Tracker, Emirates NBD reported on Monday that the leasing market started to cool down at the end of 2015. Property agents said rents continued to move higher, but the latest increase “was the slowest” since April, when the bank started the study.

“There were a number of reports that cooling demand conditions could place downward pressure on newly agreed rents over the next three months. Reflecting this, latest data pointed to a drop in new rental inquiries for the first time since the survey began in April,” the report said.

There is also an overall subdued investor sentiment in the market, with real estate professionals noting a decline in buyer enquiries and forecasting a decline in housing prices.

However, the majority of residents in Dubai (62 per cent) are expecting rents to increase in the next three months, while only a small number (7 per cent) expect to negotiate a reduction.

About the survey

The Dubai Real Estate Tracker is based on survey data collected from real estate agents and  600 households based in Dubai.  The survey achieved a representative sample of adults using quota controls set by age, income, nationality, ownership status and type of property.

Respondents were asked about current and future house price sentiment, alongside changes in current and expected changes to rental prices at the renewal stage.

The survey also indicated a subdued end to 2015 for the Dubai property market, with most real estate agents noting declines in new buyer enquiries and transaction numbers over the three months to December.

The bank said the latest drop in new buyer enquiries was the sharpest since the survey began in April, which real estate agents linked to weaker investor sentiment and muted underlying market conditions.

Forecast

Looking ahead, around 47 per cent of real estate agents expect a fall in Dubai property values over the course of 2016, while 32 per cent forecast a rise.

However, property portal Bayut.com noted that while real estate prices are "rationalising" the rental market in Dubai, as well as in Abu Dhabi, is still growing.

"We found average annual rents in the apartment category hovering around the Dh137,000 market at the end of 2015, up 2.14 per cent from Dh134,000 at the end of December," Bayut.com said.

"However, individual bed categories registered alternating changes. Average annual studio rents, about Dh61,000 in December 2015, remained the same compared to December 2014. One-bed apartments fetched Dh102,000 in December 2015, registering a 6.6 per cent increase over the same month last year."

Property values

"This marks the first time the residential market registering no effective monthly change since the current period of correction that began after the peak mid-2014," the company said.

Dubai's property sector still saw Dh267 billion in investor money through more than 60,000 transactions -- an increase of 8 per cent - last year, according to the Dubai Land Department.

"The Dubai market has reached a stage of wise maturity and rational deailing with the requirements by the various sides in the real estate market. If we look at the moves that have been recorded over the past year, we can see clearly the optimal policies followed by senior developers to diversify their products and put forward their proposals to acquire full confidence on the part of customers and investors," noted Sultan Butti Bin Merjen, director general of the Dubai Land Department.

For Bayut.com, prices are still expected to go up this year. "From what we have observed, the coming year will bring good tidings for Dubai's realty sector. With the work on the Expo 2020 site and several other related infrastructure projects set to begin next year, the emirate is likely to see a flurry of activity in the real estate sector in general," Bayut.com said.

"As the population continues to increase and the economy continues to diversify, business and job growth will drive demand for residential and commercial spaces, and ultimately help push property prices upwards."