Government’s rain action will shape property decisions, report says
The handling of the flooding after last month’s record UAE rain by different community managers is expected to affect overall decision-making of property buyers and tenants, a report has found.
With the government directing all developers and community managers to conduct the cleaning and repairs for residences free of cost, it is expected to alleviate inconvenience caused to residents, particularly in communities that have been severely damaged by the rain, the report by property consultancy Cushman & Wakefield Core said.
“Climate change and the variability of rainfall across the region are expected to continue testing the limits of city infrastructure and the built environment, particularly given that Dubai is one of the driest global cities,” the consultancy said.
The last month’s rain is expected to have a long-term impact on infrastructure planning in the emirate, it said. Dubai government has approved a “transformative” $21.8 billion sewerage system plan that will be in place for the next 100 years, the consultancy added.
The rain on April 16 – UAE’s highest since records began in 1949 – caused major disruptions to the daily life in Dubai.
Meanwhile, residential rents in Dubai increased for the 13th quarter in a row, according to the consultancy’s data.
Rents have recorded a 20 per cent annual increase, while being 72 per cent higher than the first quarter of 2020 (preCovid19), the report said.
The Real Estate Regulatory Agency calculator, which was recalibrated on March 1 to align with open-market pricing, is expected to help reduce the disparity between renewals and new rents. This is expected to hurt tenants as they face higher rents during renewals and may potentially lead to more movement in the rental market as tenants look to relocate, the report said.
The updated Rera index is also expected to result in a sharp slowdown in disputes over rental increases, it added.
“From April 1, Dubai landlords can seek rent revaluation only with a legal order,” according to Prathyusha Gurrapu, head of research and consulting at Cushman & Wakefield Core.
“Landlords in Dubai can still apply for a rent revaluation with Rera if they believe they are entitled to a higher asking rent than the one suggested by the updated Rental Index.”
Villa rents are starting to show signs of moderation, while the recent heavy rains exerted downwards pressure on rents in some of the heavily affected communities, the study found.
However, apartment rents continued to rise sharply and are mirroring the sales market trends, with the affordable and mid-market districts where the rises are sharpest.
Owing to their lower bases, Discovery Gardens rents rose by 35 per cent, Dubailand by 31 per cent, and Dubai Sports City by 30 per cent annually, while rent rises in prime districts moderated, with Palm Jumeirah at 3 per cent and Downtown Dubai at 7 per cent annually, the report said. “The rising rents and rental yield levels are also expected to trigger end-user purchases, particularly in the ready market, as mortgage costs are expected to moderate over the coming quarters,” Ms Gurrapu said.
Citywide sales prices increased by 20 per cent annually, according to the report.
A contributing factor to the surge in villa sales prices, especially in older areas like The Lakes and Jumeirah Park, is the trend of renovating and reselling units at notably higher prices, thereby elevating the average price in the area.
Sales price increases in the apartment market have moderated, particularly in the prime sub-markets, the report said.
Affordable and mid-market apartment communities have registered a sharper increase of 30 per cent and above, as evidenced by Discovery Gardens (37 per cent), Dubai Sports City (34 per cent) and Dubailand (32 per cent), it added.
More than 8,351 units were handed over in the first quarter, while an additional 29,690 units are expected to be handed over between the second and fourth quarters, bringing the yearly forecast to nearly 38,000 units, according to the consultancy’s report.
Apartment project launches in Dubai surged by 22 per cent in the first quarter, while villa launch volumes declined by 30 per cent, it said.