Residential rents in Dubai fell by up to 30 per cent in August, a real estate consultancy said yesterday, while it believed the marginal rent increases in certain pockets of the emirate were "unsustainable".
The maximum rental decline was seen in two-bedroom apartments in Palm Juemeirah, which fell 30 per cent in August. Two-bedroom apartments for rent in Jumeirah Lake Towers (Jlt, International City and Jumeirah Beach Residence decreased by 23 per cent, 17 per cent and 16 per cent, respectively. In the one-bedroom category, International City saw the maximum fall of 22 per cent, followed by Palm Jumeirah and JLT, declining 20 per cent and 19 per cent, respectively, Landmark Advisory said in its August 2009 Price Guide.
Four and three-bedroom villas in Mirdif fell 31 per cent and 26 per cent, respectively. The current market rents for a four-bed villa stand at Dh140,000 per annum in August compared to Dh202,500 in March, while for the latter it is Dh155,000 from Dh115,000.
"Demand for property was particularly strong during June and July due to a significant amount of rental contracts ending around this timeframe. The large amount of rents ending during the same period ultimately creates a temporary supply distortion following a period of particularly strong demand," said Charles Neil, Chief Executive Officer, Landmark Advisory.
He added: "The increasing rents can be attributed to a lack of supply – many landlords have removed inventory from the market to avoid renting out at current market rates, while others may be out of town during the summer period and consequently unavailable. We predict the month of Ramadan will also affect the leasing supply as many landlords are waiting until fourth quarter to reassess the market. "
Less than half of the 22,400 units have been delivered in Dubai by mid-year, Craig Plumb, Head of Research at Jones Lang LaSalle Mena had told Emirates Business. Earlier, JP Morgan estimated Dubai will have an excess of 31,000 units in 2009.
Rents in many areas of Dubai have decreased significantly over the past five months, but despite this, there are "exceptions" to this trend with some unit types in preferred developments performing well.
Apartments tuality in Dubai Marina have increased by 11 per cent for one-bedroom units and by six per cent for two-bedroom units, while three and four-bedroom villas for rent in Arabian Ranches and three-bedroom villas for rent in Palm Jumeirah returned to March 2009 rents or have increased marginally.
"Although there is rising rents for one and two-bedroom apartments in Dubai Marina, the rents for studios and larger three and four-bedrooms apartments have declined. These rental trends are, of course, highly correlated with emerging demand patterns. Preferred areas and unit types will be the first to recover in terms of rents. Tracking these specific units over the past five months indicates that rents in these areas are sustainable.
"These findings are in line with our third quarter Dubai and Abu Dhabi research report, which showed that one and two-bedroom apartments and three and four-bedroom villas were the most sought after unit types in the leasing market," Neil said.
According to Landmark research, relocation demand is continuing to drive the leasing market with demand still coming from Abu Dhabi and Sharjah as well as from within Dubai. A continued upgrading trend is also evident with location, quality and size being the key factors for relocation demand.
Most residential areas in Dubai are subject to further fluctuation, especially as new supply comes onto the market in the next 12-24 months, the consultancy said.
"If rents do come down further for these areas then we expect additional relocation demand as long as landlords adapt pricing strategies. Of course, this relocation demand will help to mitigate any further rental declines," said Neil.
According to Jones Lang LaSalle, rents have declined by 15 per cent in Q2 compared to Q1 and "will fall further" in the third quarter.
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