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Dubai’s residential tenants are far better off than their counterparts in Abu Dhabi, where rents continue to build up amid limited new supply to take the pressure off.
So much so, there is now a “widening of the gap between residential rents in Abu Dhabi and Dubai”, the real estate consultancy JLL said in its 2015 overview.
And for Abu Dhabi tenants, the situation could get decidedly stickier with the new real estate law — expected to be passed this month — making no proviso for a rental cap. While Dubai too doesn’t have the cap any more, the Rera (Real Estate Regulatory Agency) sponsored Rent Index does provide a benchmark of sorts from landlords making a unilateral hike on their asking rents.
Across 2015, rents in Dubai are estimated to have slipped by a “marginal” 3 per cent, according to JLL. But such a softening is more pronounced in the freehold communities than in the city’s traditional residential bastions of Bur Dubai and Deira and in the fast-emerging corridors around Al Nahda, Rashidiya and Al Ghusais. And according to market feedback, asking rents continue to firm up at these locations and in Sharjah.
But the biggest concern for residents going forward is that not enough new supply came through last year — as against the 25,000 homes promised by developers at the start of 2015, JLL’s reckoning is that just under 8,000 were actually delivered. Other consultancies put the estimates at around the 14,000 unit mark for new homes in Dubai.
The 2015 deliveries, according to JLL, were ‘less than half the number completed in 2014, as developers responded to more subdued market conditions and tightened liquidity, a trend likely to continue into 2016.’
As such, the projected supply of homes for this year is 26,000 units and 23,000 units in the next. But if developers continue with the slow delivery pace this year as well, it leaves Dubai’s property market with a supply deficit even as its resident base grows further. And in such an environment, there is no incentive for landlords to demand less extortionist rents.
Meanwhile, on the sales side, the situation remains in a state of flux. Analysts were expecting a lift from the removal of sanctions on Iran, both in terms of inward investments into Dubai’s property market from Iranian investors as well as those businesses setting up bases here to be close to opportunities there as and when it opens up. But the latest diplomatic showdown between Saudi Arabia, the other Gulf states and Iran adds a new unknown into the equation.
Property sales in Dubai and Abu Dhabi certainly can make do with a lift. There are investors who are snapping up deals at steep discounts and favourable payment plans, but nowhere near in sufficient numbers. Also, investor-developers are turning strategic going for plots in locations such as Arjan in Dubailand and those being opened up in Dubai South.
As for property buying, investors would do well to wait and watch, according to JLL. “Prices softened by around 11 per cent in 2015 according to RERA in the Dubai residential market and expected to decline further over the next six months,” said Craig Plumb, Head of Research at JLL Mena.
In Abu Dhabi, “The residential sales market boomed during 2013 and 2014 with 25 per cent annum growth and a major increase in transaction volumes,” according to David Dudley, who heads JLL’s Abu Dhabi operations. “As the market softened during 2015, prices have remained stable but transaction volumes have dropped significantly. During 2016, we expect transaction volumes to remain low with a slight reduction in prices in some market sub-sectors.”
Source: Manoj Nair, Associate Editor, gulfnews.com