Dubai's rental surge may cease shortly

Dubai's rental surge may cease shortlyImage Credit: Supplied

The tipping point may have been reached in how fast residential rentals can go up in Dubai. Around 19,000 new homes are scheduled to enter the market next year, and that is quite substantial for the city to absorb in such a short time. And even if some of the projected supply fails to materialise by then, there would still be something substantial to potentially keep rental hikes in check, unless there is a drastic increase in the city's population base.

A sizable portion of the new supply (29 per cent) [are] expected at the Dubailand master-development, according to the latest update from the consultancy CBRE. Rents in Dubai had seen increases of ''close to 50 per cent during the past two years'', the report added.

Even now, resistance is starting to build up against unfettered rental hikes. According to CBRE, rents actually dipped by 1 per cent during the third quarter — this after 10 consecutive quarters of increases. ''However, the percentage drop has been higher for some individual developments — the highest falls were noted within Dubai's freehold developments, while rental rates across leasehold areas remained more stable with few areas still registering an increase', the report said.

Based on its transaction data for the third quarter, locations such as International Media Production Zone, Tecom C and Downtown Dubai may have seen a 3 per cent trim in rental demands. Other clusters such as Business Bay, Jumeirah Lakes Towers and Dubailand Residences recorded rent dips of around 2 per cent.

The freehold locations that managed to stave off a softening in rents were the Greens and Dubai Marina, according to CBRE.

Newer clusters

There is more supply on the way. Mid-tier developers are working on completing multiple projects simultaneously, in locations such as Sports City, and which could add to the residential stock in bulk by 2017 and thereafter. Also, newer clusters are getting created, such as the Silicon Park in Silicon Oasis, which has already recorded a level of maturity in terms of both infrastructure and residential and commercial capacity.

Based upon existing construction projects, including many new starts, more than 55,000 new residential units could be completed by 2017, CBRE estimates.

''While the level of mortgage funding support can always get better, there is a gradual transition happening towards buying a home in Dubai rather than renting,'' said Ziad Al Chaar, Managing Director at Damac Properties, which has just signed a deal with ADCB for home financing on its latest Akoya development. ''Global investors looking to acquire in Dubai for second homes or asset buying will always be there... but the resident base wishing to shift from being tenants to owners is growing apace.''

This is not confined to high-end offerings. The affordable theme is gradually being picked up by developers. ''In the medium-term, they are buying land parcels where affordable condominiums are on the anvil,'' said Sameer Lakhani, Managing Director at Global Capital Partners. ''And where these have been offered, the response has been astonishing... they are up 30 per cent in a market where the overall number of transactions are down year-over-year. But they may not grab headlines because they were not prestige locations or projects.''

Find out the latest residential comparison in the UAE

Source: Manoj Nair, Associate Editor,


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