Dubai’s Freehold Property Rents Down By 3.2% in Q3 2015

Nov 25, 2015

Rents In The Emirate Did Not Change Quarter-On-Quarter in Q3 But Sales Prices Continued To Dip During This Period, A New Report Shows

 

Rents across Dubai’s freehold residential properties are down year-on-year by an average of 3.2 per cent during the third quarter of 2015 as supply in the market grows.

According to a report by property consultant Cluttons, rents have largely remained stable during Q3 2015, recording no growth quarter-on-quarter.

The biggest rental decline in Dubai’s residential market occurred within the villa segment in communities such as Springs, Jumeirah Village, Al Reem, Falcon City and The Villa. The report noted that rents in these locations fell by nearly 6 per cent between January and September this year.

Cluttons also pointed out that RERA’s rental calculator seems to be “out of sync with reality” and might not capture the emirate’s rental index since it will only be updated annually.

“It has served as a useful barometer for tenants and landlords since 2009 but the increasingly complex nature of Dubai’s residential market suggest the city may need to find an alternative to maintain transparency and investment volumes in the buy to let sector,” said Cluttons’ head of research Faisal Durrani.

Meanwhile house prices in Dubai continued to fall for the fifth consecutive quarter with apartment and villa prices dipping marginally by 0.8 per cent and 0.5 per cent respectively in Q3.

Cluttons estimated the property sales prices in the emirate to fall by 3 to 5 per cent over the next 12 months due to slowing global growth and increasing supply in the market.

“We expect 7,400 units to complete in 2016, 10,300 in 2017 and a further 13,600 in 2018, with the new schemes launched during the past quarter, helping to even out the balance between villas and apartments. Over the next three years, 48 per cent of the units delivered will be villas,” said Cluttons’ chief executive Steve Morgan.

Despite the fall in prices in certain pockets of residential communities, the vast majority of residential submarkets have seen little or no change in values this year. The report partly attributed it to the continuing appeal of apartments to the buy-to-let investment community.

“We’ve seen the popularity of off-plan property sales persist, partly fuelled by the fact that off-plan residential property prices are often 20 per cent to 30 per cent lower than completed secondary stock, which in essence might allow buyers to bypass some of the stringent lending criteria and also possibly avoid the need for a mortgage altogether.”

Although the outlook for Dubai’s residential market is slightly negative in the short term, Cluttons predict that infrastructure investments planned around Expo 2020 might revitalise the economy and create jobs. This might in turn boost property prices, the report forecasted.

Credits to Gulf Business

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