Apartment rents in Dubai are expected to see a steady decline of 3 to 4 per cent this year while villa rents are set to fall marginally by 1 to 2 per cent, according to a new report by real estate firm Core Savillis.
Dubai’s apartment rents fell 0.3 per cent per month during the last six months but villa rents remained flat.
“These figures are significant because even though the drop is minor, it represents a turning point where renters can breathe a sigh of relief as they are unlikely to see their rents shoot up as they have done over recent years,” the report said.
Core Savillis noted that rental rates have risen significantly over the last three years.
Apartment rents in Dubai shot up by 17 per cent in 2012, 26 per cent in 2013 and 15 per cent in 2014, the report showed. Meanwhile villa rental prices rose 18 per cent, 17 per cent and 9 per cent respectively in the last three years.
“This is clearly unsustainable and has made Dubai suddenly much more expensive to live in and a far less attractive place for expats to move to,” the report said.
“Many renters have been forced to relocate to less desirable locations that are in mid-con- struction phases which damages the lifestyle factor that attracts so many foreigners to Dubai’s shores.”
Although rents are forecast to fall by 4 per cent, Core Savillis cautioned that the decline should not be interpreted as a crash.
Meanwhile the report also noted that residential prices in the emirate will continue to see a decline until early or mid-2016. But the drop is unlikely to dampen investor interest as many of Dubai’s properties still provide high yields.
“As prime residential rentals have adjusted slower than prices since the beginning of the year, yields have mechanically increased,” said managing director – residential at Core Savillis Edward Macura.
“This makes high end residential assets more attractive for buyers looking at re-entering over the next 12 months with mid to long term investment horizon.
“The market has matured, and as prime areas have become more distinctly identifiable, so has changed the profile of local and global investors in the region. Pre 2008 speculators are increasingly being replaced by more sophisticated buyers seeking long term capital gain and decent yield levels.”
The report also noted that the market is expected to return to growth by 2017 as Dubai gears up to host Expo 2020.