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Dubai: Housing rents in Dubai could post a significant decline from 2016 onwards, as thousands of new apartments and villas will be completed this year, according to a real estate company.
Asteco’s latest report showed that as of the last quarter, rental rates for apartments in Dubai were 7 per cent higher than in the same period of 2013. Villa rents went up by 4 per cent, while office rents were up by 12 per cent.
The cost of renting in Dubai has been predicted to start falling in 2015, with analysts forecasting a 5 per cent drop before the second half of the year.
John Stevens, managing director at Asteco, said a huge supply of new residential units will enter the real estate market in the coming months, with 12,000 apartments and 2,000 villas expected to be completed this year. The new supply will put pressure on rents to come down to more affordable levels.
“This is good news for tenants across the emirate, and a more tempered rental environment is especially welcome when you consider that since 2011 apartment rents have increased by 65 per cent, and villas by 55 per cent,” said Stevens.
“Looking beyond this year, a more significant drop in rental rates could be on the cards from 2016 onwards as the large number of projects announced in 2013/14 (an estimated 12,000 to 14,000 villas units) are completed,” Stevens added.
Stevens, however, could not specify how far the rents will fall in 2016.
Asteco has recently released its latest report, the “Dubai Property Review 2014 Highlights and 2015 Outlook,” which specifies where Dubai’s rents have fallen or risen. According to Asteco, villa rental rates are likely to “remain relatively stable” in popular areas, while those in “less desirable” locations are forecast to post “marginal declines.”
A comparison of rates between today and several years ago, however, would show that apartment rents have increased by 65 per cent since 2011, although they are still 25 per cent lower than in 2008.
“Rental rates are 7 per cent higher, on average compared to last year. Villa rates increased by approximately 55 per cent since their lowest in 2011, with Q4 2014 rates still 20 per cent lower than in Q4 2008, but up 4 per cent since last year,” Asteco said.
The slowdown in rents is strengthening Dubai’s position as a more ideal place for budget-conscious tenants compared to Abu Dhabi, according to another analyst.
Property rents in Abu Dhabi increased by three per cent between the third quarter and fourth quarter of 2014 due to a limited supply of residential units and the upward trend is expected to continue this year.
Cheffie Melhem, residential consultant for Better Homes Abu Dhabi branch, said the UAE capital is “most definitely” a more expensive place to rent a residential unit and will remain that way.
“[The] demand [in Abu Dhabi] far exceeded current supply, thus making it an owner/landlord’s market,” Melhem told Gulf News.
“Given the recent increase in rental rates in Abu Dhabi, the market appears to be static. However, should the demand continue to exceed supply, which I foresee happening, there will definitely be an increase in current rates as we move into 2015,” Melhem added.