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Tenants and landlords all over Dubai are logging on to Rera’s (Real Estate Regulatory Agency) recently updated rental calculator to work out whether there are rent increases for tenancy agreements. The good news for some tenants is that the index has gone down for the plush Dubai Marina and Jumeirah Beach Residence (JBR). Jumeirah Lakes Towers (JLT) remains the same. If you live in the Downtown and Business Bay areas, prices have gone up. This is based on data for one bedroom apartments.
In my opinion, the market is stable. At the moment there’s a healthy inflow of people coming in, plus new properties on the market to enable stability for the next three to six months.
It’s the classic rule of supply and demand. Dubai is split into two halves, you have the Dubai Marina/ JLT end — the south — and then you have the north end around Downtown and there’s not much in between. It’s as though Mall of the Emirates is the split point between north and south. In the south there’s a lot more supply in the market, you have so many apartments in JLT, you have Discovery Gar dens, which is a few minutes away, you have all the properties in Al Furjan, which is just behind and you have Dubai Marina. There is constantly more stock becoming available in south Dubai.
In the Downtown area, nothing has really been added, except a couple of Damac buildings. It has finally become a very established area with Business Bay, Downtown and DIFC. The area hasn’t expanded geographically. Whereas the south has expanded and there are more units, meaning they can’t command a higher rent. Developer Emaar has several buildings under construction in the Downtown area, which until they hand over, there’s little to release the pressure of short supply.
There are so many factors that could determine what’s going to happen to the market, such as the oil price. I think oil prices will stabilise and this area will go from strength to strength. In my opinion, people will continue to move to the UAE and that will drive rent prices up. Developers are also doing a great job of creating quality stock at reasonable prices.
We have recently seen a rise from about 20-25 per cent of new leads from fresh enquiries coming into our business over the last six months. It could be because there are more families moving to the UAE. We have lots of clients where the main breadwinner is from a finance background and they want to move to Dubai, as there is a lot more red tape and taxation for these types of companies in Europe. At the moment, many of these firms are relocating to DIFC. Now if they are moving here, then they want to keep their family household in a driving distance of their workplace, so their enquiries are for the Downtown, Burj Khalifa, Jumeirah and Umm Suqeim areas.
Again it comes back to supply and demand, if you think about the DIFC, it employs thousands and thousands of people and it’s human nature that we all want to live close to our workplace, so that we don’t have to commute and that’s only going to drive prices up at that end of town.
There are also some families relocating from Abu Dhabi to Dubai. It could be because there are a lot more entertainment options. Families from the region from countries such as Iraq, Syria and these troubled areas are relocating as well because Dubai is a safe haven and has a strong economy, there are business opportunities. Many wealthy individuals from Europe, particularly France and the UK are relocating to Dubai too.
Another factor that makes a difference to the market is employment levels. There are more and more businesses being registered on a daily basis in the UAE, if you go to the Dubai Economic Department, you will see that there are new companies constantly being founded and that creates employment. Employment creates a need for real estate and when there are more people, prices go up. It’s the golden rule of supply and demand.
Increase in rents
I believe rental prices will keep going up especially in the Downtown area and I think that’s due to more and more families relocating for various reasons, all of them need housing. People confuse the macroeconomics behind real estate, but it really is just basic supply and demand and everybody in Dubai needs a property. There isn’t anyone sleeping homeless in this country, they are either going to rent or buy and that’s it. Rents are unlikely to go down anymore in south Dubai, but I think it’s going to go up further in Downtown.
Source: Myles Bush, Special to Property Weekly
The author is CEO of PowerHouse Real Estate.