Win-win for Dubai tenants
Tenants could have the upper hand when negotiating rents thanks to a significant amount of stock coming online in 2017.
dubai — Tenants in Dubai could have the upper hand when negotiating rents thanks to a significant amount of stock coming to the market in 2017, according to consultancy Asteco.
There are 31,500 apartments and 12,500 villas and townhouses scheduled to be delivered this year in areas including City Walk by Meraas, Damac’s Akoya, Dubai Wharf by Dubai Properties and Emaar’s Mira. This is in addition to 8,750 apartments and 5,000 villas completed in 2016.
“Tenants will be offered a significant choice of completed properties in 2017 in both established and new communities,” said John Stevens, managing director of Asteco.
“The additional supply will continue to put downward pressure on market rates, which will place the negotiating power firmly in the hands of tenants, despite a forecasted increase in population,” he added.
However, the gap between planned delivery and actual handover can be “worlds apart, which could limit the impact of oversupply and generate modest levels of growth in certain popular communities,” he said.
Asteco believes the balance has been tipped away from landlords and it is the tenants who have the advantage when it comes to negotiating lease terms. Although apart- ment rents declined by five per cent in Q4 of 2016 since Q3 and six per cent over 2016, the individual numbers indicate that the market is becoming increasingly fragmented. While rents in certain areas declined, others were more resilient to change and even experienced marginal growth.
The majority of areas have seen rents for one-bedroom apartments drop Dh5,000 to Dh15,000. Units in Jumeirah Beach Residence are now available for Dh105,000, Business Bay demands Dh75,000 and International City reports Dh45,000 on average.
As average, one-bedroom rents in Jumeirah Lakes Towers witnessed declines of Dh15,000 over the year to Dh75,000, while rates in Downtown Dubai (Dh115,000), The Greens (Dh95,000) and Al Barsha (Dh75,000) held their rents year on year.
Average villa rents fell by three per cent over Q4 and five per cent year on year. Rents in areas such as Al Barsha and The Meadows saw double digit declines over the year as tenants relocated to newer, more affordable areas. However, average rents for three-bedroom villas in popular communities such as Jumeirah (Dh190,000), Jumeirah Village (Dh160,000) and The Springs (Dh180,000) remained unchanged from a year earlier.
Stevens said: “Landlords, especially corporates, offered incentives such as increasing the number of cheques accepted and longer rent-free periods to entice take-up, especially in newly handed over communities that still lack supporting infrastructure, retail and leisure facilities. Single unit owners [especially those with mortgages] were more inclined to reduce rents to increase take-up, rather than undergo prolonged periods without any rental income.”
Overall, average sales prices remained relatively unchanged over Q4 and for the full year, which Stevens believes, “signals the bottoming out of the market”.
Although average sales prices of an apartment in Dubai Marina dropped compared with 2015, rates rose marginally over the quarter. In line with the apartment sector, average villa sale prices were generally flat over the last quarter, while the overall average annual change was minimal at -2 per cent. Well-established communities in prime locations such as Emirates Living and Arabian Ranches saw an average increase of Dh150 per square foot, while rates for developments with more supply growth potential, such as Jumeirah Village, dropped by Dh100 per square foot.
Stevens said: “Market sentiment is expected to improve on the back of increased government spending on infrastructure, hospitality and retail projects, which will have a positive effect on demand for real estate in Dubai.”
“The sales market will be increasingly driven by long-term investors and owner-occupiers and the rise in first time buyers will continue throughout 2017 as people take a long-term view to living in Dubai.”
— business@khaleejtimes.com