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Rental rates for apartments and villas declined by an average of 2 per cent in the second quarter compared to the previous quarter, with marked declines at the higher-priced end of the market, says Asteco’s UAE Property Review - Q2 2015 for Dubai.
Homes for sale also recorded an average fall of 2 per cent, with some areas performing significantly worse than others, dropping 11 per cent year-on-year for villas with apartments decreasing by 7 per cent.
Asteco says the decline in prices signals a new era for Dubai’s residential market. “The softening in Dubai’s residential rental market appeared earlier than we anticipated, offering tenants in the emirate an opportunity to recoup somewhat after several tough years of high rents,” said John Stevens, Managing Director of Asteco. “The decrease was felt throughout the market and areas with a significant amount of completed new supply were the most affected. Additionally, some buyers of nearly completed buildings were keen to sell at negative premiums due to the imminent completion of the building, which required final payment.”
The highest quarter-on-quarter apartment rental declines were recorded on Shaikh Zayed Road (7 per cent), Palm Jumeirah (6 per cent) and Jumeirah Beach Residences (7 per cent). Conversely, IMPZ, Dubai Sports City and Dubai Silicon Oasis recorded higher rentals from 6-13 per cent compared with last year due to the completion of community infrastructure and increased occupancy levels, making them popular mid-market residential areas.
In the villa segment, the handover of projects like Casa Villas at Arabian Ranches brought rental rates for the area down by 7 per cent quarter-on-quarter and 15 per cent year-on-year. At the Mudon community, the ongoing handover of its three- and four-bedroom town houses, with competitive pricing starting at Dh175,000 a year, put pressure on landlords of neighbouring developments to secure and retain existing tenants.
“We even saw a 6 per cent decline for Palm Jumeirah, with the handover of the lower specification Palma Residences town houses impacting rental rates due to their lower price band. So we are seeing a similar tenant-friendly trend in the broader villa market, with more flexible instalment plans for example, and this is set to continue as areas like Dubailand continue to deliver new supply,” said Stevens.
Apartment sales in the second quarter were marked by a shift towards more affordable properties with locations such as IMPZ, Dubai Silicon Oasis, International City and Queue Point and Sky Courts developments in Dubailand.
Affordability was also a priority for villa investors with Jumeirah Village recording a high number of transactions for some of the town house properties by Nakheel and in Indigo Ville, priced at Dh700,000 to Dh1.2 million. In comparison, larger properties, including five- and six-bedroom villas, saw minimal transactions completing in communities such as The Villa or Dubai Sports City, despite strong rental demand.
Source: Property Weekly