Monday, April 12, 2010
Dubai residential rental market stable in Q1
Dubai residential rental market stable in Q1
Villa rents and sales flat with only slight decrease in apartment rents – office rents still sliding due to increased supply
Villa rental rates in Dubai remained stable with no significant change in the first quarter of this year compared with the last quarter of 2009, according to the Dubai residential and commercial property market report for Q1 2010 published today (12 April 2010) by Asteco, the biggest property services company in the United Arab Emirates.
Apartment rental rates recorded a slight decrease of 5%, largely due to the increased supply in the market, although some areas such as Downtown Dubai witnessed increases of 2%.
However office rents continue to decrease and have seen an average drop of 7% due to subdued demand and increased supply says Asteco’s report.
Commenting on the results of the latest report, Elaine Jones, CEO of Asteco Property Management, said: “Over the past 25 years we have seen various peak and troughs in the property market with an overall incredible growth in the region. The only constant is change and the positive upturn after every decline.”
The report adds: “Demand for villas was predominantly for those in established locations such as Jumeirah where rental rates remain unchanged over the last quarter and in the Palm Jumeirah and The Springs which recorded slight increases of 5% and 2% respectively.
“Developments along Emirates Road such as The Green Community and Arabian Ranches continue to generate demand from Abu Dhabi as rental rates are competitive, however, increased availability in Arabian Ranches, Green Community and Mirdif have resulted in slight drops in rental rates.”
Villa sales prices remained almost flat, recording an average decrease of 1% over the last quarter.
The Asteco report says: “Established communities such as The Springs, Meadows and Arabian Ranches are the preferred choice for buyers. There is good demand for smaller villas due to the price point on both a sale and lease basis. Although the number of enquiries is strong, there is still a gap between asking prices and what buyers are willing to pay.”
“Apartment rents in Downtown Dubai and Palm Jumeirah increased by an average of 2% and rents remained stable in Jumeirah Beach Residence due to the popularity of these developments which offer community living and an abundance of retail and entertainment facilities,” the report adds.
The report adds that apartment rents in areas such as Discovery Gardens, Dubai Marina and Jumeirah Lakes Towers “are expected to decline further throughout the year due to numerous projects reaching completion.”
Asteco says it has registered an increase in sales volume in Q1 2010 compared with Q4 2009, especially on the Palm Jumeirah and Downtown Dubai. “This is in line with both increased availability of finance at lower rates and availability of affordable deals,” said Asteco.
The report adds: “Jumeirah Lakes Towers, Discovery Gardens and International City have also reported increased transaction activity and enquiries - mainly due to price reductions and handover of projects.
“Similar to villas, a large number of buyers are looking for smaller units in established locations due to a lower price point and the increased opportunity to lease the property out for investment purposes.”
Office rental rates continue to decrease and have seen an average drop of 7% due to limited demand and increased supply in areas such as Dubai International Financial Centre, Jumeirah Lakes Towers and Tecom. The report says, “The number of enquiries remained stable from small- to medium-sized businesses looking for units ranging from 1,500 to 5,000 square feet with the majority of tenants looking for fitted office space to reduce start-up costs and time.
“As more stock enters the market, this will continue to put downward pressure on rental rates and occupancy which will benefit tenants who are looking to upgrade in terms of quality and location.”
Sales prices for office units dropped by 10% compared with Q4 2009 but despite the decrease, demand and resulting transaction volumes remain low, says Asteco.
“Developments such as Jumeirah Lakes Towers, Tecom and Business Bay have recorded some activity over the last three months. Jumeirah Lakes Towers benefits from its affordability due to a large completed and near completed inventory. Tecom, on the other hand, has a limited amount of freehold units and benefits from a large number of residential units in close proximity to a living and working environment. Asteco has seen a few transactions for Business Bay due to uncertainty over completion and the amount of construction which continues to hinder sales.”
The report adds that, according to free zone authorities, developers in Dubai are seeking to convert commercial developments into mixed-used projects in order to respond to changing market conditions.