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Dubai: Landlords in Dubai should be careful what they ask for — with more than 20,000 new homes set to join the residential stock in the next 12 months, they may not be able to get away with hiking rents arbitrarily. Quite a substantial portion of the new units are being added in mid-tier, relatively more budget-friendly locations such as Sports City, Silicon Oasis and the residential communities within Dubailand.
Unlike at any time in the recent past, Dubai’s tenants have the options available to them — if they find their existing landlord demands as untenable, they can look elsewhere. An estimated 65,000 units should be ready for occupation by end 2017, of which just under 80 per cent would be apartments, according to the latest findings from CBRE. (But balanced against that would be the continued surge in the population base, expected to grow by between 100,000-120,000 a year, according to some industry sources.) This could have led landlords to take corrective action on their own and why residential rents in Dubai were up by 7 per cent on average this year compared with the sharp 23 per cent spike last year, says the outlook on Dubai realty from CBRE.
Even sales transactions are on the muted side, with growth dropping to 18 per cent from 2013’s 30 per cent. “The momentum of growth in rental and sales values has not continued,” said Nicholas Maclean, Managing Director at CBRE Middle East. “There’s been a clear move at self-regulation on the part of sellers setting their asking prices, and it’s also being seen on the rental side where landlords are becoming more realistic of their expectations.
“That this has been achieved without any need for government intervention will be encouraging for overseas investors, especially Asia-Pacific funds, which have in the past found pricing levels frustrating.”
Maclean said that the impact on overseas investor interest in Dubai’s realty from the oil slide and the parallel strength shown by the dollar would have to be seen in perspective. “The property market here has reached a situation similar to London’s … overseas investors buy in for the safe haven environment,” Maclean added. “They buy properties outright based on this sentiment than what they might generate as rental yields.”
But lower oil prices could mean less funds flowing into the region’s sovereign wealth funds (SWF) and which could be deployed in overseas real estate. “If the $40 a barrel comes to pass and is sustained for six to 12 months, there would be some impact at the global level,” Maclean said. If prices do stay stabilised for the immediate future, it would mean that the local realty space has completed the discounting of the Expo 2020 win buzz. That had sparked an upturn which had reached near unsustainable levels by March 2014.
If the current values prevail, it could help push more tenants to seriously consider buying a property in Dubai for their own requirements. But for that, they must be convinced that values do not see a spike the moment the market starts noticing some increase in buyer activity.
Source: Manoj Nair, Associate Editor, gulfnews.com