- Broker Directory
- My Tools
- News & Advice
- Market Trends
- Other GN Sites
After recording ten consecutive quarters of positive growth, average residential rents in Dubai suffered a marginal dip during the third quarter this year, falling by around 1 per cent. The dip has been attributed to an increase in new residential stock combined with weaker demand during the traditionally slow festive and holiday period.
The slowdown reflects a general movement towards stabilisation in the market, along with the slowing of growth in sales values and lower transaction volumes. We expect this trend to continue into the final quarter. However, as was the case with Q3, the market will remain fragmented with pockets of both growth and decline evident within certain sub-markets and developments. Given the continued flight to affordability, we may expect to see some secondary locations outperform prime areas in the short term.
In recent days, Cityscape has again provided the forum for the launch and re-launch of several major master plan developments, and while supply may not yet be a major concern for the residential market, the emirate's development potential has certainly grown significantly with the launch of projects such as Dubai Creek Harbour.
While we have already seen a moderate cooling effect felt as a result of the government's intervention in the mortgage market and their decision to double transfer fees, there is still strong evidence of volatility and speculation in the residential segment. This is a factor that could yet pose future challenges for the market if further regulatory measures are not implemented to help better control boom and bust cycles.
It is worth highlighting the progress that has been made in the regulatory environment during the past few years, reflecting Dubai's growing maturity through the introduction of new regulations aimed at delivering transparency and boosting investor confidence. As a result, Dubai continues to see strong investment appetite driven by the quality of its infrastructure, the country's stable political environment and prospects of sustained economic growth in the coming years.
While the residential market is showing signs of stabilising, the Dubai office market continues to experience rising demand with new requirements reflecting the improving state of the sector and the positive economic outlook. The freezone areas which are an important part of Dubai's office market continue to record healthy occupancy levels.
Whilst a number of major office developments, such as DTCD Phase 1, are under construction, the supply of good quality, single-owned properties is likely to remain constrained in the short-term, much to the frustration of a number of major corporate occupiers. This is not the case for strata accommodations, with a large influx of new buildings expected in the coming years, particularly in areas such as Business Bay.
Despite continued growth in new office stock, secondary locations have actually managed to maintain positive rental growth during the quarter. Migration of tenants from older districts, availability of varied options for new start-ups and improved infrastructure is helping to strengthen rental and occupancy rates in locations such as Jumeirah Lake Towers and Business Bay.
Overall, we do expect the scheduled pipeline of offices and residential units to help constrain rental inflation and add more balance to the market. However, the question still remains as to whether we will see another correction. For now, it appears the answer is ''No'', but with a huge potential pipeline of products to be launched in the coming years, this will largely depend on the role of the master-developers.
Find out whether Rents have really dropped in Dubai
Source: Mat Green, Special to gulfnews.com
The writer is the Head of Research and Consultancy UAE, CBRE Middle East