KHALEEJ TIMES, Thursday, Jan 10, 2019 | Jumada Al Awwal
Brace for cheaper house rents in Dubai this year
Residential rents in
Dubai are expected to see further declines over the first half of 2019, before
stabilising in the second half of the year or early 2020. This comes on the back
of a huge level of supply expected to hit the market this year.
Analysts estimate that more than 63,000 homes will
be delivered in Dubai this year. These are projects that were launched as Dubai
won the bid to host Expo 2020.
"While many of these projects will not be
delivered on schedule, the level of actual completions is still likely to exceed
demand. Another negative influence on the rental market are the attractive
payment plans being offered by many developers that are seeking to attract
renters to purchase property in Dubai. This will result in a relative shift in
the market with more demand to own and less to rent properties," says Craig
Plumb, head of research, JLL Mena.
According to Prathyusha Gurrapu, head of research
and advisory at Core: "In the rental market, the older central built stock
continues to be under pressure to retain its novelty with occupier preferences
shifting to outer areas where newer and competitively priced options are
increasingly becoming available."
JLL estimates that around 22,000 homes were
completed in Dubai in 2018, the highest level for the last five years. There was
a significant surge of handovers witnessed during Q4 2018. The vast majority
(around 75 per cent) were apartments, with the remainder comprising townhouses
The consultancy ValuStrat estimates that upcoming
supply for 2019 currently stands at 78,566 residential units.
"However, this number is subject to significant
downward adjustment. Communities with significant upcoming supply in 2019
include Dubailand [Akoya Oxygen, Damac Hills, Town Square, Dubai Legends,
Arjan], Mohammed Bin Rashid City [Meydan One, Dubai Hills Estate, District 11],
Jumeirah Village Circle and Business Bay," informs Haider Tuaima, head of real
estate research at ValuStrat.
These are the communities that are likely to see
significant rent reductions.
"The majority of completions for 2019 will be in
the apartment sector, with major deliveries expected in Meydan [including
Azizi's Riviera project] and Al Habtoor City," adds Plumb.
Apartment districts of Discovery Gardens and Dubai
Sports City witnessed over 25 per cent reduction in rents from their peak Q4
2014 values, according to Core data. The villa communities of Jumeirah Park and
Jumeirah Village Circle and Triangle also witnessed over 30 per cent decline in
"Citywide asking rents declined 8.6 per cent since
last year. Apartments in International City, Discovery Gardens and Dubai Sports
City saw steepest annual rental declines of 14.6 per cent, 14 per cent and 13.1
per cent, respectively. Asking rents in villa communities, Jumeirah Islands and
Palm Jumeirah fell 12 per cent and Victory Heights declined 10.5 per cent
annually," ValuStrat's Tuaima adds.
As a result, more landlords are responding to the
tenant-friendly market by reducing rents or offering other incentives such as
rent-free periods, accepting multiple cheque payments or the inclusion of
maintenance within the rent.
Generally, smaller apartments and larger villas
saw the biggest rental declines last year. Due to the increasing stock of
smaller format and studio apartments, these units appear to be most affected,
with a year-on-year rent drop of 16 per cent for studios and 12 per cent for
As residential rents have softened in the Northern
Emirates as well, there has been a mixed response from tenants in terms of
moving back to Dubai. Tenants are also moving from northern parts of Dubai
towards the centre, the east and further south of the city.
"Some families have moved to Dubai to be closer to
their workplace and avoid longer commute time while others have tried to
optimise housing expenses by taking advantage of the softened rents and not
relocated," reckons Prathyusha.
"Some families are moving into Dubai from Sharjah
and the Northern Emirates as rentals decline in Dubai. The extent of this trend
is limited by the corresponding fall in rents in these more remote locations,
which means that tenants can reduce their living costs by remaining in place,"
Apartment sales prices fell by 5 per cent in Q4
compared to Q3 2018 while average villa prices softened by 3 per cent.
Furthermore, year-on-year performance showed that apartment prices declined by
16 per cent and villas by 13 per cent, according to Chestertons.
Knight Frank estimates that residential prices and
rents in the UAE are likely to continue to soften in 2019. "However, we may see
additional demand which helps underpin the market as a result of the recent
approval of a range of legislations to ease visa regulations, given that many of
the changes are linked to property ownership," says Taimur Khan, research
manager, Knight Frank.