Palm Jumeirah property rents slump amid Dubai supply glut
Asteco report says rents plummet 7% in first three months of 2017, down by 14% annually
Dubai tenants remained budget-conscious, taking advantage of additional supply and competitive rates to relocate to new properties or negotiate existing contracts, placing downward pressure on rental rates, according to a new report.
Asteco's Q1 2017 Dubai market report said that in contrast, sales prices in communities with good infrastructure, amenities and limited future supply potential recorded marginal increases.
Apartment rental rates declined 3 percent on average compared to the previous quarter and and 8 percent over the year.
High-end properties were most affected with Palm Jumeirah witnessing price decreases of 7 percent quarter-on-quarter and 14 percent annually.
“A combination of new supply and tenants taking advantage of competitive rates has resulted in landlords offering more flexible terms either by increasing the number of cheques or, in some instances, offering rent free periods. This has been compounded by the addition of 3,600 apartments in Q1, which is expected to top 17,000 by the end of the year, thus putting further pressure on the rental market,” said John Stevens, managing director, Asteco.
In the villa rental market the trend was similar to apartments with declines of 3 percent compared to Q4 2016 and 8 percent annually as tenants took advantage of increased availability of competitively priced properties.
The report said rental rates are expected to decline further as 4,000 villas are scheduled to be delivered by the end of the year, which are likely to be leased below prevailing rates to improve take-up.
Overall, Asteco’s research identified a 1 percent quarter-on-quarter decline in apartment sales prices in the first 3 months of the year, with the market down by 3 percent on an annual basis.
Apartments on Palm Jumeirah witnessed no change annually, whilst quarter-on-quarter sales declines of 3 percent resulted in prices to drop to between AED1,000 and AED 2,600 per sq ft, the report said.
It added that in the affordable segment, Dubai Sports City witnessed an annual increase of 6 percent and a quarterly decline of 2 percent.
Villa sales prices recorded a quarter-on-quarter decline of 1 percent, while annually the figures saw little movement.
“From a sales perspective, apartments witnessed declines across the board. However, it was the upper-end of the market that felt the impact most acutely, with both Downtown Dubai and Dubai Marina seeing year-on-year decreases of 7 percent,” said Stevens.
"The villa sales market fared better as some of the established communities with good transport links and within proximity to DMCC and Media City, and those with good amenities including shops and restaurants, witnessed increased demand resulting in price growth," he added.
“Sales prices in many communities are fluctuating and are not expected to stabilise until rental rates bottom out, which is not expected to happen until later this year or early 2018,” said Stevens.
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