Mubasher TV
Contact Us Advertising   العربية

Dubai residential rents stabilise in Q1, to fall at 2018-end – Cluttons

Dubai residential rents stabilise in Q1, to fall at 2018-end – Cluttons
Residential rents across Dubai were stable in Q1-18

Dubai – Mubasher: Residential rents across the emirate of Dubai were stable during the first three months of 2018, which helped improve the annual rate of change to -3.1% compared to -7.7% at the end of 2017, a new report showed.

“The growing volume of off-plan investment stock, destined to be made available for rent after handover, is likely to pose challenges in the future. The ability of the rental market to absorb a high volume of new stock will likely be tested over the next three years,” international real estate consultancy Cluttons stated.

Data for Q1-18 marks the first stable quarter for rents in Dubai in over two years, the report indicated.

“We expect newly completed rental properties to command the attention of tenants, while older and more secondary property will register rent falls. This flight to quality phenomenon will likely result in the creation of a very distinctive two-tiered market,” commented Murray Strang, Head of Cluttons Dubai.

In the short-term, Strang expects rents to fall by around 5% to 7% in the remaining months of 2018.

In the sales market, average residential values across Dubai declined by 2.5% in Q1-18, although the report notes that more affordable areas such as International City and Discovery Gardens “stood out as bastions of stability in the face of continuing headwinds for the market.”

Meanwhile, Cluttons’ head of research Faisal Durrani stated: “Affordability aside, one of the key factors that has likely contributed to the stability in values in Dubai’s more affordable residential areas is the distinct lack of new supply in these markets.”

Durrani further expected demand “to remain firmly centred on new homes priced under AED 800 [per square foot] (psf) as affordability takes centre stage in the market”.

Cluttons forecasts that the Dubai market will see 134,000 new units by the end of 2020; however, only a third of these units will be priced under AED 800 psf, which will highlight “the burgeoning affordability issues that the city is storing up for the future.”

“Even if you factor in some slippage in deliveries of circa 20% to 30%, as has been the case historically, supply will still exceed the projected demand resulting from the organic growth in population, which will see 77,500 households created. While one may argue that supply and demand appear to be well balanced, it’s worth remembering that not all new households will purchase a home; many will opt to rent, in keeping with the transient nature of the UAE’s residents,” Durrani commented.

He noted that real estate developers seemed to be “ignoring this critical issue at present”, noting that the newly-proposed law regarding the restriction of off-plan sales until schemes are 50% complete may be “a blessing in disguise.”

The real estate consultancy also projects that the new law would reduce off-plan sales activity in the emirate of Dubai, which remained “surprisingly resilient, despite a cooling in demand levels for secondary market property over the last three years.”

Strang concluded that such rules and laws are created to protect buyers and preserve and enhance the city’s reputation as an investment hub.