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Dubai: Tenants in Dubai are not likely to see a notable decline in housing rents this year despite the expected delivery of thousands of new flats and villas, a property analyst told Gulf News.
Rami Abi Faraj, head of residential sales and leasing for Better Homes Real Estate, said the 25,000 new units that are scheduled to be turned over this year might not be enough to bring the prices down because the demand for accommodation, owing to Dubai’s growing population, continues to increase.
What is more likely to happen instead is that rents will generally remain stable, although a few select areas that will be flooded with new units may still see a slight fall in numbers.
“It’s very unlikely [that] there will be any significant rent reduction this year because we have continued high demand for most areas. There may be 25,000 units coming to the market but I think the key question is how much demand will grow along with that supply,” Faraj pointed out.
Property analysts had earlier predicted that residents in Dubai will spend less on rent this year because thousands of new flats and villas will add to the supply and drive prices down.
Rents were forecast to fall by an average of five per cent, but as of the first three months of the year, however, rents in a number of areas continued to increase. Asteco’s report released in March had predicted, though, that a significant fall in rents in Dubai will be experienced only from 2016 onwards.
Some sources said a rental decline hinges on a few factors, which include increase in supply, drop in demand and on time delivery of completed properties. If not all of the forecast residential units are handed over in the next few months or by the end of the year, it could have an impact on prices.
An important factor to watch out for is Dubai’s population, which is expected to grow considerably, given that more people want to come to the emirate for work as the World Expo 2020 draws near.
“If the emirate manages to boost its population adequately, the decline could be neutralized in the wake of an increased demand for accommodation, leading to a stabilized market. Considering the inflow of expats leading to the World Expo 2020, the availability of affordable housing for the mid-income sector has become all the more relevant,” said property portal Bayut.com in a report.
Dubai’s population is estimated to have grown by five per cent to more than 2.3 million in 2014.
“If Dubai’s population is about three million and the population is growing by three to four per cent per year, then that’s roughly another 105,000 people to house. Assuming three people per property, that’s another 35,000 homes needed by the end of this year to meet demand. In which case 25,000 is actually not enough,” said Faraj.
“But the equation is obviously more complex than that, so frankly, it’s very hard to tell but our view is that rents will generally remain stable other than in a few years that receive a lot of supply, in which case rents may fall a bit for six to eight months before picking up again.”
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Source: Cleofe Maceda, Senior Web Reporter, gulfnews.com