Relaxed residential rents for Dubai?
Although a lot of landlords are asking for more money this year, residential rental prices in Dubai, particularly in prime locations, are showing signs of letting up, thanks to budget-conscious tenants and a rather upbeat construction sector.
Rents in Dubai have recently gone up on the back of renewed confidence in the economy and the real estate sector. Between January and March this year, the cost of leasing an apartment and villa increased by 3 per cent and 4 per cent respectively. When compared year-on-year, asking rents for apartments went up by 12 per cent.
However, according to real estate consultancy Jones Lang LaSalle (JLL), the recovery in rental values is “more broad-based”, adding that rents are now growing at a slower pace in general due to tenants’ migration to cheaper locations, coupled with a fresh supply of villas and apartments.
Primary areas, in particular, are now showing “slower paces of growth”. Areas such as Downtown Burj Khalifa, Business Bay and Dubai Marina, where residential units are generally more expensive, are considered prime locations.
“The growth in prices and rents might be easing due to high levels of future supply, tenants relocating to cheaper locations, limited debt availability and more mature market regulations,” said Alan Robertson, CEO of JLL Middle East and North Africa.
More handovers likely
As per a JLL report released this week, there are already plenty of villas and apartments to fill this year and more are expected to be handed over.
In the second quarter of 2013 alone, more than 3,000 residential units were added to Dubai’s residential stock inventory, and assuming that all projects being monitored are completed on time, about 38,000 more are likely to enter the market between 2013 and 2015.
The apartment rental index in Reidin.com showed a 12 per cent year-on-year increase, but Robertson noted that the improvement remains 24 per cent lower than in January 2009 when the index started. “Overall, the residential market appears to be experiencing a broad-based recovery in 2013,” said Robertson.
A report by Asteco in April noted that rents jumped significantly in International City, where a two-bedroom unit went up by 8 per cent to Dh40,000, while most other areas recorded increase of around 3 per cent. Jones Lang LaSalle noted that the high demand for budget accommodations has contributed to the upward rent movements in affordable and secondary areas.
As of June 2013, the total residential stock in areas monitored by JLL stood at around 360,000 units. Around 3,400 units were handed over in the second quarter of 2013 and about 18,600 more are expected to come to the market before the end of the year. By 2015, around 38,000 additional units are expected to enter the rental market.
Most of the upcoming units will be found in areas outside central Dubai. The largest proportion of future stock will be located in Dubailand, with 5,800 units expected — Dubai Sports City (4,000 units); Business Bay (3,600 units); Dubai Marina (2,800 units) and Jumeirah Village (2,500 units).