Dubai apartment rents down 17pc, villas stable…
The apartment rents in Dubai fell 17 per cent on average last year owing to an increased supply of quality accommodation, thus bringing several upscale developments within mid-income budget reach, according to property management firm Asteco.
In contrast, the villa rental rates fared better than apartments in the fourth quarter, falling by just 1 per cent over the three-month period, primarily due to the limited availability in central areas, the Dubai-based company said in its Q4 report.
It was a ‘flight to quality’ for the tenants in Dubai as an increased supply of top-class quality, affordable accommodation, particularly in the apartment sector provided the catalyst for considerable tenant movement across the emirate in Q4, the report stated.
In addition apartment rental rates declined by just 3 per cent during the same period, the lowest quarter-on-quarter fall during the year, an indication that the market is showing signs of stabilisation, the Dubai-based company said in its report.
‘The real estate market is characterised by a large supply of high quality stock at affordable rates, leading to a flight-to-quality trend currently seen across Dubai,’ commented Elaine Jones, CEO, Asteco Property Management.
‘Indeed although apartment rental rates fell last year, it was still less than the 24 per cent drop in 2009, further indication that market prices are stabilising,’ she noted.
According to the report, International City has seen the largest drop due to tenants migrating to better quality developments in more desirable locations. Overall studios experienced the lowest decline and one-bedroom apartments suffered the largest fall.
“Rents are expected to continue their downward trend in 2011, albeit at a lower rate as more supply enters the market, providing prospective tenants with even greater choice,” added Jones.
Interestingly, the villas fared better than apartments as it fell by just 1 per cent primarily due to the limited availability in central areas. Quality communities such as Palm Jumeirah and Jumeirah Islands performed better than more mature developments such as The Springs and The Meadows.
Unsurprisingly, office rental rates fell by 8 per cent in the fourth quarter 2010. DIFC set the tone by reducing their rates per sq ft from Dh370 in the first quarter of 2010 to Dh230 in Q4 (a fall of 22 per cent) in an attempt to compete more favourably with quality developments on Sheikh Zayed Road such as Rolex Tower and Sama Tower.
Continued delivery of new stock in JLT and Tecom sent rents down by 20 per cent and 12 per cent respectively. Although transaction activity has picked up due to the improving economy, continued oversupply will no doubt put further downward pressure on rental rates, the report said.
In contrast, office sales prices only declined by 6 per cent in Q4 and just 8 per cent during the whole of 2010, predominantly due to weak transaction activity. Prices will remain subdued due to a lack of investor confidence, it added.
Apartment sales prices slipped by only two per cent on average suggesting a slowdown in the rate of decline, Asteco said in its Q4 report.
Continuous delivery has seen average sales prices in Dubai drop by Dh100 to Dh850 over the past year, while prices in International City and Discovery Gardens have fallen to Dh350 and Dh450 per square foot respectively.
The sales prices on Palm Jumeirah were flat in Q4 but still command one of the highest prices at around Dh1,500 per sq ft, Jones said.
Meanwhile, the villa sales prices in Q4 were relatively stable with only the Springs experiencing a 4 per cent fall, she added.
Overall the market prices fell just 8 per cent in 2010, with downward pressure more predominant in developments with a large inventory, such as The Springs and the Arabian Ranches. Market demand continues for smaller units, driven by affordability, the report concluded.
Report – TradeArabia News Service.
