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If the current tightness in Dubai’s property market continues, it could help ease some of the pressure that has been building up on the rental side.
‘The conversion rate of existing supply to rental inventory generally increases during a down cycle,’ according to Phidar Advisory in its third quarter update. ‘During a stagnant or contracting market, investors are more inclined to fill the unit with a tenant, generate income and wait for the up cycle. The end result: increased rent inventory and downward pressure on rents, even if the aggregate supply-demand dynamics remain unchanged.’
Apart from the need for property investors to create optimum returns from their assets, the sluggish economic and job growth could also ‘fuel lease rate decline in the short-term’, according to Phidar.
Dubai’s tenants caught in the grip of three successive years of high double-digit growth in rentals will be hoping that the forecast do turn out to be true. But for that to happen, the supply of completed homes must remain consistent. As of now, that is a big if.
‘If all active construction projects and launched projects as well as a portion of announced projects are completed in five years, then the supply-demand dynamics should stay in relative equilibrium,’ according to the Phidar report. ‘Of course, this also implies there is limited need for additional residential developments in the next five years, based on the current economic forecasts.’
But, ‘Realistically, not all of these projects are feasible due to issues of design, positioning, or financing, or a combination thereof. Thus, it is probable that new development opportunities exist over a five-year time frame, albeit limited in scale and niche in nature.’
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Source: Staff Report, gulfnews.com