Dubai: Dubai’s residential rents, which dropped further by an average of three per cent in June, will surge back up again as soon as the emirate starts working on the real estate projects slated for the World Expo in 2020, an analyst said.
“The trend is expected to reverse when the Expo 2020 projects are awarded for construction, in turn leading to increase in population in Dubai,”Paul Maisfield, CEO of MPM Properties, a real estate advisory subsidiary of Abu Dhabi Islamic Bank (ADIB), told Gulf News.
The latest report by ADIB and MPM Properties showed that Dubai’s total housing stock surged to nearly half a million (479,000) residential units, as 6,750 new properties were added during the second quarter this year.
According to Maisfield, rents in some areas in Dubai are still flat, while in others, the rates are declining. Certain locations, however, are seeing more entry of tenants who have moved out of their previous apartments or villas in search of cheaper alternatives.
“The 479,000 units is the total stock in Dubai and has fairly high occupancy in prime areas and good developments. The rest of the areas are witnessing an increase in occupancy as new supply enters, as the rent reaches a point where tenants are priced out and forced to look elsewhere for cheaper options.”
Dubai's rental and sales markets have been witnessing declines as new properties increased, offering both tenants and investors more options. According analysts, this was compounded by falling foreign investor interest due to economic conditions abroad and the strong greenback eroding buyers' purchasing power.
According to Asteco, the rental rates and sales prices have been posting declines for months now, although a few areas are still registering increases.
"While rental rates and sales prices in Dubai's residential market saw some improvements in mid-2012, 2013, nevertheless, witnessed the fastest growth rates, which peaked in [the second quarter of] 2014."
"Since then, however, the market experienced a period of stabilisation, with declines observed in the last six months."
According to ADIB and MPM Properties’ report, Dubai’s completed apartments saw capital values dropped by 3.5 per cent quarter-on-quarter. Among the areas monitored, Business Bay registered the biggest decline of 5 per cent.