For the UAE property market as a while, this will be the year when it expects to see benefits start to emerge from the many incentives the government announced in 2018. Image Credit: Pankaj Sharma/Gulf News Archives

Dubai: Apartment rents in Dubai are down more than 40 per cent from their mid-2014 peaks, with one-bedroom apartments in the city suffering the worst declines, by 45 per cent.

Chances of any immediate improvement are slim, with Dubai likely to welcome a likely 24,300 new apartments this year. Plus about 8,500 villas, according to the 2018 update on the UAE property market by Asteco.

Here’s a look at what one-bedroom units are going for at some of the more popular locations — in Business Bay, what used to rent at Dh93,000 in 2013 now can be had for Dh65,000. At Dubai Marina, the drop is even steeper, according to Asteco, from Dh105,000 to Dh68,000.

What leasing agents say

And this is what’s happening in the city’s older neighbourhoods — a one-bedroom in Deira would now go for Dh48,000 and down from Dh68,000.

Some leasing agencies say that rental transactions dropped even further during the fourth quarter of 2018.

Now, even if only 15,000-20,000 apartments end up being handed over by December this year, it would still be a substantial supply that needs to get filled up.

But that would require landlords to keep making cuts in their rental demands, unless something dramatic happens to turn the scenario around.

In 2018, Asteco reckons 12,000 new apartments were completed. This is at the lower end of the estimates that property consultancies have put out. Last week, Reidin-GCP said it’s estimates are that nearly 20,000 new homes were completed during the year.

A good number of these are one-bedroom units, which will place more pressure on current rental levels in this category. According to Asteco, it would be by end of this year that the “rate of decline is expected to slow”. Dubai’s residential tenants, however, will take any such rental rate respite as a relief.

And if tenants are still complaining their rental outgo is high, it’s because they are not looking around for options.

“Landlords have generally been more open to negotiate discounts, and/or offer incentives such as lease-free periods and flexible payment terms (multiple cheques) to retain tenants and/or entice new ones,” said John Stevens, Managing Director at Asteco.

All of which will have landlords in Sharjah change their strategies as well. Though actual forecasts are not available, Asteco reckons that Sharjah will record a “significant amount” of new supply this year and the next, setting up “further declines in rental rates”.

New inventory

Plus, as usual, there is the Dubai factor.

“New inventory at reduced rates in Dubai is likely to prompt more commuter-residents to relocate closer to their place of work,” the report notes. The beneficiaries could be Dubai Sports City — where a one-bed is leasing at Dh48,000 against Dh74,000 in 2014, and some of the mini-communities within Dubailand.

Another location in Dubai that is starting to emerge in developer plans is Jebel Ali. Wasl Properties recently launched sales at a new scheme — the Gardenia Townhomes — there. But projects there are still another two to three years from completion.

While the rental market situation may be fluid, Sharjah’s off-plan and freehold buying activity could be in for another good year as the handful of key projects — such as Aljada and those from the Eagle Hills-Shurooq combine — reach key project milestones.

For the UAE property market as a while, this will be the year when it expects to see benefits start to emerge from the many incentives the government announced in 2018. But Asteco’s report cautions that they may need time to start generating results.

“Whilst published in 2018, they require further clarifications and the effect of these initiatives can only be judged after implementation, although they are anticipated to be positive,” it adds.

These include the publication of 10-year residency visa for investors and certain professionals and 100 per cent ownership of companies outside free zones. Plus, there is residency visa for retirees, which property markets elsewhere have used to good effect. 

“These government initiatives, coupled with a number of other catalyst such as increased federal and local budgets, stimulus packages, diversification/growth strategies and reduced cost of doing business, are expected to increase investment and play positively on market sentiment,” the report says.

Developers going at full speed on ongoing projects

Worried about a massive new supply hitting Dubai’s property markets? Developers with projects on site are not going to put off by these worries.

“Construction activity during 2019 (for committed projects) is expected to continue unabated ... despite a slowdown in new project launches,” says the latest Asteco report.

“This is largely due to construction-linked and post-completion payment plans, which ensure payments are only received when milestones are met.

“This supply, in addition to many project handovers previously scheduled for 2018 spilling over into 2019, will contribute to the total delivery of over 30,000 residential units.