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Demand for affordable residential housing is a continuing trend, which is attracting new arrivals from Dubai to Sharjah and Ajman.
The latest research has highlighted a slowdown in residential rental growth rates as the supply and demand dynamics underwent a geographic shift.
The emirate of Sharjah recorded 2% quarter-on-quarter growth for apartment rentals with year-on-year growth of 19% in typical developments and 18% in the high-end category, whilst the annual rates in the other northern emirates of Ajman, Umm Al Quwain and older stock in Ras Al Khaimah witnessed strong growth with increases of 4%, 6% and 5%, respectively.
It would appear Ajman and, indeed, Umm Al Quwain are now taking over the mantle as the relocation destination for budget-conscious residents as landlords in Sharjah ask higher-than-average rental rates, particularly for brand new buildings in popular locations like Al Nahda, Corniche and Al Wahda.
However, this eagerness to capitalize on market opportunity is not being matched by transaction volume, confirming that budget issues are still a key driver.
Overall, Dubai’s real estate sector witnessed further stabilization and slowing of both rental rates and sales prices in Q3 2014 as the downward trend continued for the third quarter in a row.
However, interest in affordable residential housing continues to shift to peripheral communities such as Jumeirah Village, Dubai Sports City and Dubai Silicon Oasis as many prospective property purchasers remained priced out of the more popular areas of the city such as Downtown Dubai, Dubai Marina (including Jumeirah Beach Residence) and Jumeirah Lakes Towers.
Sharjah, in particular, has benefited in recent months due to the aggressive rental rate increases in Dubai, but this quarter saw a degree of stabilization in Dubai’s more affordable communities, which led to a reduction in the number of residents choosing to relocate.
This was highlighted by the RERA rental index. With rents increasing steadily since 2013, many existing tenants have elected to remain where they are and absorb the rent increase rather than start from scratch and incur the cost of moving, agent commissions and the general upheaval.
The popularity of Dubai has not waned and demand remains, with property investors still choosing the emirate over the other emirates in the country.
A raft of recent new launches, including projects such as Manazel Al Khor in Dubai Culture Village, Rahat Villas in Mudon and 200 new units in Remraam, has joined a growing list of announcements with another real estate developer also launching its NAIA Hotel and Hotel Apartments, 34 premium Fendi Villas in Akoya Drive and two hotel apartments in Jumeirah Village.
All these launchings highlight the demand in place for premium priced properties.
Several new project announcements are expected to test demand in the market, giving buyers new opportunities to invest, thus highlighting the appetite for Dubai.
This was underscored at the Cityscape exhibition where there were 27 new projects launched, generating “strong levels” of investor interest.
On the demand side, the UAE’s, in particular Dubai’s, economic growth will generate investment demand (internally and externally) to accommodate the hundreds and thousands of new expatriate arrivals which the government forecasts, in the gradual build-up to the Expo 2020.
Source: John Stevens, Managing Director, Asteco