Apartment rents remain weak as more tenants shift to villas, supply remains high
International buyer interest and improved market sentiment are driving sales in Dubai’s property market, with the value of transactions jumping by nearly 50 percent during the second quarter of 2021, new research by Chestertons showed.
Residential sales topped 31.02 billion dirhams ($8.4 billion) between March and June 2021, up from 20.77 billion dirhams from the previous quarter. The transaction value is also at its highest level since the fourth quarter of 2013, when sales totalled 31.67 billion dirhams.
A total of 14,426 units were snapped during the second quarter, up by 35.48 percent from the first quarter of the year.
In a statement, the property firm said the surge in sales has been driven by “continued international buyer interest”, coupled with an improvement in interest among residents in the UAE.
Chris Hobden, head of strategic consultancy at Chestertons Middle East and North Africa (MENA), also noted there is a desire among UAE residents to buy ahead of anticipated higher prices. The favourable mortgage rates and generous developer incentives are also stimulating local demand.
“We have seen a clear improvement in market sentiment among UAE residents this year, with a desire to buy ahead of anticipated price rises,” Hobden said.
Interest in villas
Among the international buyers, there is a huge interest in villas, thereby driving prices within the segment by 5.7 percent quarter on quarter and 9.1 percent year on year.
Several buyers are interested in properties in The Meadows and The Springs, which have seen the highest quarterly increase of 6.6 percent. The Lakes are popular as well, posting a price increase of 6.5 percent, while Jumeirah Park posted a 5.4 percent rise.
Rents
Within the rental category, the strong interest from tenants has pushed the rates for villas to increase by 2.6 percent quarter on quarter, a modest increase compared to the first quarter, which posted a 2.3 percent growth.
“The rise in villa rents was principally driven by continued tenant demand for more open space and outside areas, with agents reporting a sustained increase in villa enquiries since the easing of social distancing restrictions last year,” said Hobden.
Among the communities, Palm Jumeirah saw the highest increase in villa rents, at 3.9 percent quarter on quarter, followed by Jumeirah Golf Estates, Victory Heights and The Lakes, which recorded increase of 3.4 percent, 3.1 percent and 3 percent, respectively.
The rest of the locations posted increases ranging between 1.6 percent and 2.3 percent.
However, rents for apartments fell by 0.5 percent on average, about 8.7 percent below their Q2 2020 levels. This is mainly because of continued tenant preference for villas, coupled with long-standing oversupply, according to Chestertons.
“While we expect apartment rents to face continued pressure medium-term, improvements in employment levels noted over Q2, along with continued take-up of the UAE’s remote-working visa, should serve to support demand,” said Hobden.
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