People from Sharjah and even Ajman are moving to Dubai in a big way as rents in the emirate become increasingly attractive, analysts say. They point out that as rents continue to fall in Dubai, Sharjah and Ajman have seen rents fall by a massive 21 percent and 28 percent respectively, as residents take advantage of Dubai’s rock bottom prices.
But it is not just cheap rents in Dubai that are doing the trick, explained Matthew Green, head of research and consultancy at CB Richard Ellis. Quality is a big factor too, he explained, suggesting a dearth of up-market properties in the northern emirates is behind residents’ exodus to Dubai. “The quality [of accommodation] in Dubai is typically superior to product in the northern emirates,” he said.
He added that, in general, economic uncertainty globally was prompting tenants to choose to rent rather than buy, impacting the UAE’s freehold market. “Economic issues such as the US downgrade and regional concerns have also created additional uncertainty which could impact the investment market,” he said. “With supply coming in so quickly, new freehold developments are experiencing the most depreciation.”
Meanwhile, in Dubai, the availability of property is continuing to allow tenants to be pickier when choosing a place to live, a trend that is set to continue into the fourth quarter. Michael Michael, the director of Landmark Advisory, said that with new supply, occupants are gravitating towards more established communities with good facilities. CBRE’s Green added that incentives vary from rent-free periods of up to two months, lower rent and parking facilities, as well as better payment terms of up to six cheques a year. Despite the increased supply and lower prices, Michael said that there will continue to be an influx of residential apartments as well as commercial office space, citing projects in Business Bay and Sports City that have not yet been developed.
Abu Dhabi market
Meanwhile, in Abu Dhabi a number of residential projects are poised to come onto the market, such as those on on Reem Island and Al Raha Beach. Once these become available, Michael predicts that there will be some migration to Abu Dhabi from Dubai, which he says will help stabilise prices in the capital.
A recent report by Landmark revealed that apartment rents in the capital have declined three percent, but while increased supply is behind the rent decline in Dubai, with new projects experiencing the most depreciation, properties in prime areas such as Downtown Dubai have been less affected. Villas in Dubai have actually seen a 2.8 percent quarter-on-quarter increase due to lack of supply, it notes.