Dubai tenants are spoilt for choice
dubai — 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.”
While many of these projects will not be delivered on schedule, the level of actual completions is still likely to exceed demand
Craig Plumb,
Head of research, JLL Mena
In the rental market, the older central built stock continues to be under pressure with occupier preferences shifting to outer areas
Prathyusha Gurrapu, head of research and advisory, Core
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 the fourth quarter of 2018. The vast majority (around 75 per cent) were apartments, with the remainder comprising townhouses and villas.
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,” said Haider Tuaima, head of real estate research at ValuStrat.
These are the communities that are most 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 values in the fourth quarter of 2014, according to Core data. The villa communities of Jumeirah Park and Jumeirah Village Circle and Triangle also witnessed over 30 per cent decline in rents.
“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 rentfree 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 one-bedroom units.
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,” said 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,” Plumb adds.
Apartments in International City, Discovery Gardens and Dubai Sports City saw steepest annual rental declines
Haider Tuaima, Head of real estate research at ValuStrat