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To celebrate its 30th anniversary this month, UAE-based property management company Asteco tracked the evolution of Dubai's real estate sector with a review of the emirate's rental market all the way back to 1985.
One of the firm's first instructions in 1986 was to lease two apartment blocks in Deira's Al Muraqqabat area. The annual rent was Dh9,500 for a studio apartment, Dh11,000 for a one-bedroom apartment, Dh17,000 for two bedroom and Dh25,000 for a three-bedroom.
''From those humble beginnings, few could have envisaged the extraordinary growth of the UAE real estate sector,'' said John Stevens, Managing Director of Asteco.
Between 1985 and 1995 there was little, if any, change in rental rates, but in 1996 they gradually started to increase with studio apartments costing an average Dh14,000 a year and three bedroom apartments going for an average of Dh28,000.
''However, in 1998 the Asian financial crisis, declining oil prices and the bursting of the dot.com bubble all took their toll,'' said Stevens.
By 2000, rents averaged Dh16,500 for studio apartments and Dh34,000 for three-bedroom apartments. But in 2001, the year of the 9/11 attacks that impacted the world, studio rents fell close to 1995 levels, although the year also marked the start of a regional economic upturn built on rapidly recovering oil prices.
The resurgent local economy with an abundance of new projects, companies, free zones and mega developments fuelled the growth of rents, which reached about Dh17,000 for studios and Dh41,000 for three-bedroom apartments in 2005.
By 2006 a dramatic change in rental trends was beginning to manifest as the gap between housing supply and demand narrowed. Two years later much of the world was in the grip of a recession, but the price of oil had just peaked at $147 and Dubai's soaring growth continued. The rent for the studios reached more than Dh36,000 or almost Dh17,500 more than the previous year.
However, the boom in studio apartment rents didn't last for long. With supply of studios and affordable apartments coming on stream from the new Dubai areas such as Discovery Gardens and International City, the studios at Al Muraqqabat experienced a considerable fall in prices.
In the fourth quarter of 2008, the global recession finally caught up with the region, oil prices tumbled and Dubai property prices dropped by up to 70 per cent in extreme cases.
After the anaemic years of 2009 and 2010, Dubai's diversified economy started to pick up once again, and although rental rates in much sought-after areas such as the Palm Jumeirah have since hit all-time highs last year, current average apartment rental rates throughout Dubai are 25 per cent lower than their peak in 2008.
''By contrast the studios in Deira are rented out for an average of Dh45,000, while the three-bedroom apartments average Dh135,000 — five times more than what they were commanding in 1985,'' said Stevens.
Asteco reports that the Dubai market is set for a period of stability this year.
Get a glimpse on the cautious optimism at London fair
Source: Property Weekly