New homes put pressure on Dubai rents

dubai — Downward rental adjustments continue to take place in the Dubai market, says a Q2 2018 report released by property company Chestertons on Monday. This is due to several factors: additional stock being delivered, thus providing more choices, some tenants purchasing their own properties and conservative market sentiment.

Average apartment rents are down four per cent from the last quarter and average villa rents are down two per cent, said the report.

The greatest decline in apartment rents was Dubai Sports City, dropping seven per cent with a one-bedroom unit available for Dh57,000 per annum. This was closely followed by Motor City and Jumeirah Lakes Towers where declines of six per cent were witnessed, with the cost of renting a one-bedroom apartment at Dh71,000 and Dh77,000, respectively.

“There was a lot of additional stock being delivered in this [affordable] market segment which posed an additional pressure on communities comprising similar stock. The additional supply does not necessarily have to be delivered in those affected areas as the communities within the similar market range are competing for the same demand sources,” said Ivana Gazivoda Vucinic, head of consulting and valuations and advisory operations, Chestertons Mena.

Villa rents saw the highest decline in The Springs and Victory Heights at four per cent, followed by Al Furjan and Jumeirah Village Triangle at two per cent. The Meadows, Jumeirah Islands and Jumeirah Golf Estate all decreased by one per cent, while Arabian Ranches was the only community to increase in price, by one per cent, according to Chestertons data.

“Buyers’ interest is moving from a bit dated stock in Springs towards newer stock Reem and Mira being developed by the same developer. This, coupled with the new Nshama master development is creating a new destination in Dubai with higher-quality villa stock which is influencing the demand decrease in other areas such as Victory Heights et al,” Vucinic told Khaleej Times.

Chestertons estimated that a twobedroom villa in Arabian Ranches is priced at Dh133,000; in The Springs, the price is Dh115,000; in The Lakes, the cost is Dh163,000; and in JVT, the cost per annum is Dh140,000. Sales prices for Dubai apartments fell by one per cent in Q2 compared to the last quarter and average villa sales prices remained flat, said Chestertons.

The continued decrease in apartment prices over the last few years has made the bigger units more affordable, hence there has been a lower number of transactions but a higher value of transactions.

“Affordability has been one of the top trends so far this year. What we’re witnessing, especially with the large amount of supply entering the market, is that developers are focusing on the investmentactive, mid-market segment through a range of flexible payment options and smaller units to keep prices attractive,” added Vucinic.

Sharing her outlook on H2 2018, Vucinic said: “We expect the downward correction to continue with sales prices and rents decreasing by a few percentage points on a quarterly level. However, we still expect to see similar level of transactional activity driven by end-users/investors benefiting from the lower sales prices coupled with some percentage of forced sales due to investors’ inability to repay loans due to weakened rental levels.”