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Dubai: Forecast of an across-the-board rent decline did not happen during the first three months of the year, as a number of tenants in Dubai continued to witness increases of as much as 5.74 per cent, a new report showed.
Data compiled by real estate portal Bayut.com showed that the average rent for three-bedroom apartments during the first quarter of 2015 increased by 5.74 per cent from the previous three months. Annual rents for apartments in this category are currently averaging Dh215,000.
One-bedroom apartment rentals also went up by 3.39 per cent, with annual rents going up to Dh101,667, about Dh3,300 higher than last year’s Dh98,333.
“Expectations of an across-the-board decline in rental prices in [the first quarter] proved to be wrong, and the solid demand for residential units kept rents afloat in many localities,” the company said in a report sent to Gulf News.
The report said rental rates for apartments with two bedrooms also saw a minor increase of 1.28 per cent, with annual rates averaging Dh158,333.
The property portal, pointed out, though that some areas noticed some price reductions and a wider rental decline is still expected once the new units hit the market.
Al Mario, who is renting a two-bedroom apartment in Dubai Marina, is looking for a new place to stay. His landlord has announced that he will increase the rent by 20 per cent once the lease is renewed in June.
"The landlord said the rent is still within the Rera rental index calculator. So our rent will be Dh120,000 by June. There is no consideration even though we have been living in the same apartment for five years," Mario told Gulf News.
"This increase of 20% is too much to bear. We only get five per cent increase in our salary in a year, if we are lucky. With this skyrocketing rent increases and the everyday heavy traffic caused by the tram in the vicinity, it is time to relocate."
Dennis, another expatriate renting a three-bedroom flat with his family in Al Muteena, Deira, said he has just received a notice from his landlord informing him that the rent will increase by 15 to 20 per cent in July.
Haider Ali Khan, CEO of Bayut.com, attributed the rent increases to the strong demand for apartments for lease. The additional residential units that were forecast to be completed this year have yet to be delivered.
"The rise in rental values can be attributed to a natural hike in demand or marginal inflationary trends year-on-year that is expected in almost every sector," Ali Khan said.
"The rents were expected to decline with the delivery of new units early in 2015. Since they have not been delivered as yet, the demand remains strong and the rentals have continued with their increasing trends during the first quarter."
According to JLL Middle East and North Africa, rents in general remained relatively flat, while sale prices for apartments and villas registered marginal declines.
“Rents remained relatively flat. We expect this trend to continue with average sale prices declining by up to10 per cent during 2015,” said Craig Plumb, head of research at JLL Middle East and North Africa.
“The Dubai real estate market continued to experience subdued activity during the first quarter of the year. Residential sale prices saw a marginal decline across both apartments and villas.”
JLL said it is normal for sale prices to move ahead of rents and “this appears to be happening in the residential market in Dubai at present.”
“While this is resulting in increased rental yields, this is likely to be a temporary factor with more attractive yields eventually increasing demand and therefore sale prices again.”
Source: Cleofe Maceda, Senior Web Reporter, gulfnews.com