These tier-2 locations offer lower prices and the appeal of moving to a new property
Several families in Dubai are moving from centrally located communities to secondary areas. These outer lying communities offer lower prices and the appeal of moving to a new property.
"We are seeing some tenants move from central locations such as Dubai Marina, Downtown and Jumeirah Beach Residence out to the suburbs of Dubai such as Mira, Damac Hills and Town Square, for example. There are a number of reasons for this, but the most common are the price point and the appeal of moving to a brand-new property. Landlords in the suburbs have to be competitive with properties in central locations and thus they are offering lower priced rental opportunities and are often willing to accept more cheques," says Lewis Allsopp, CEO of Allsopp & Allsopp.
However, with falling rents, people are also moving from secondary areas to primary city areas as they become more affordable.
"The ones who move into secondary areas are those who are upgrading to townhouses that have become more reasonable or people who are moving from the neighbouring emirates to affordable housing in Dubai," reckons Sanjay Chimnani, managing director, Raine & Horne Dubai.
Tenants are moving from prime locations such as Downtown, Palm Jumeirah and Springs to outer locations such as Meydan, Nshama Town Square, Mira, Mudon and Ranches 2. These are all new communities and prices are cheaper than in the more established areas of Dubai.
"As rent constitutes around 30 to 40 per cent of one's disposable income, these newer locations are around 15 to 20 per cent cheaper than the prime locations. So, cost saving is the prime attribute. Others would be better value, much more spacious and better quality units," explains Abdul Kadir Faizal, co-founder of crowdfunding real estate platform Smart Crowd.
While some tenants are taking advantage of lower rents in outer lying areas of Dubai, others are seizing the opportunity of social mobility and moving into areas once considered beyond their budget.
"It is natural for budget-conscious professionals to want to take advantage of lowering rents. This may allow them the opportunity to improve other areas of their lifestyle or simply be able to save more. Conversely, families may associate a better quality of life as the opportunity to move into a community with better infrastructure and recreational facilities - again as a result of the cost barrier being lowered," observes Nick Grassick, managing director of PH Real Estate.
With no likelihood of the contraction in rental values to subside, the relocation of tenants to more affordable homes will continue. This trend will also rise on the back of newer communities with better road and transport infrastructure getting handed over.
Offering a contrarian view, Allsopp says: "We may see a slowdown of this trend in 2019. There is still an abundance of tenants moving to and living in central locations and they remain the most searched for areas on property portals and the highest lead-generating communities. Last year, the population grew by over 6 per cent and we could well see that percentage rise again this year in the run-up to Expo 2020. The Expo will create many jobs and opportunities in Dubai, encouraging people to move to the city. As a result, centrally located communities will remain hugely popular. People moving to Dubai are attracted to areas such as Dubai Marina, Downtown and JBR to enjoy the fast-paced, exciting lifestyle the city has to offer."
Centrally located communities are beginning to see some vacancies as landlords haven't adjusted their prices to the new market level and on par with outer locations. Landlords in centrally located areas need to look at their price point and the number of cheques they will accept.
"The owners need to adapt to prices in the market. If their houses are not well-maintained or upgraded, it will be difficult for them to maintain good rents. Many properties will be left vacant because they hope to achieve the same rent which they were getting three to four years ago. Within centrally located areas, landlords must renovate tired properties," says Ashley Hawthorne, leasing and property management manager, Espace Real Estate.
"Gone are the days of big company packages with accommodation paid for. These days, people are finding it increasingly difficult to pay with one or two cheques. If a landlord is flexible on cheque payments, they will have a much greater chance of attracting a tenant and find it easier to achieve a slightly higher rental yield," suggests Allsopp.
Grassick says landlords may provide property management as part of the offering, whereby maintenance and condition issues are professionally managed by a third party.
"Essentially, it comes down to price. The rent will need to be competitive and in line with secondary locations. Also, they can offer greater flexibility on payment terms such as instead of one or two cheques, they could offer six cheques to make their properties more attractive," concludes Faizal.
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