Cavendish Maxwell reports 5% Dubai rents decline in the second quarter

Residential rents in Dubai dropped by an average of 5 per cent year-on-year in the second quarter of 2018, and declines are expected to continue in the second half of the year as the ‘tenant’s market’ persists due to rising supply and a fight for affordability, a report said.

Consultancy Cavendish Maxwell’s Q2 Dubai market update says that landlords are offering incentives such as flexible payment terms and rent-free periods. In some instances they are lowering rates for existing tenants to keep units occupied amid demand low, according to the consultancy’s Property Monitor database.

Operating expenses continued to rise and net realised yields compressed in the majority of locations across Dubai over the past 12 months.

“Thus, investors need to factor in building quality, occupancy levels and expected supply in the community to ensure relatively stable rental income,” the report said.

UAE property markets have slowed in recent years in the wake of a three-year oil slump. Rental and sales prices have declined steadily over the period, pressured by new supply coming to the market, muted demand and reductions in housing allowances, which have crimped consumer purchasing power.

Prices are expected to drop throughout the year, albeit at a slower rate as market sentiment rebounds on the back of an improved economy and higher oil prices.

According to Cavendish Maxwell’s report, annual rental declines in Dubai in the second quarter were most pronounced in International City, The Greens, Discovery Gardens and Al Furjan, which registered 12-month changes of more than 6 per cent.

Rents dropped by an average of 2.5 per cent quarter-on-quarter, the report said.

The majority of rental agreements for residential properties were based on the traditional one-cheque agreement, accounting for 38 per cent of the total. However, this reduced by 12 per cent compared to the previous quarter as landlords become more flexible. Rent paid in four cheques increased by 6 per cent over the quarter, according to Property Monitor’s database of rental contracts.

On the sales side, residential prices declined by an average of 2.9 per cent year on year and 1.1 per cent quarter on quarter, the report said. Villas in The Springs and Victory Heights saw the steepest annual declines, of 4.5 per cent and 4.2 per cent, as well as apartments in Jumeirah Lakes Towers (4.5 per cent), Al Furjan and Jumeirah Village Triangle (4.4 per cent).