Dubai’s rental market saw a significant rise in the second quarter of 2014, with apartment rental rates increasing four per cent and villas by five per cent compared to the first quarter, according to a report by Asteco.
Jumeirah Beach Residence saw the highest increase in rent prices at 10 per cent quarter-on-quarter. International City saw the highest annual growth at 66 per cent, with two-bedroom apartments currently being rented for Dhs70,000 a year, while rents in Jumeirah Lake Towers increased by 54 per cent year-on-year, reaching Dhs150,000 for a two-bedroom apartment.
“With rents increasing steadily since 2013, many existing tenants have elected to remain where they are and absorb the rent increase, as indicated by the RERA rental index, rather than start from scratch and incur the cost of moving and agent commissions,” said John Stevens, managing director, Asteco.
Villa rental rates grew by five per cent, on average, in the second quarter of 2014 with Jumeirah witnessing the highest growth of 12 per cent quarter-on-quarter (40 per cent year-on-year). Jumeirah Village saw an 11 per cent increase in the second quarter (20 per cent year-on-year) due to its affordable prices, with a three-bedroom townhouse priced at between Dhs155,000 and Dhs185,000 per year.
However, the report also found that sales slowed during the second half of this year.
Sales of apartments and villas saw a marginal increase of six per cent and three per cent respectively, with buyers shifting to lower priced areas such Jumeirah Village, Dubai Sports City and Dubai Silicon Oasis, rather than the more expensive Downtown Dubai and Dubai Marina locations.
“We recorded positive growth rates of around 10 per cent in the second quarter for these areas, but at the same time there was a decline in interest in the previously popular affordable communities of Discovery Gardens and International City, which only registered minimal growth, indicating that they are now topping out price-wise and any further growth will take them out of the affordable bracket,” said Stevens.
Transaction levels have also declined as property owners refuse to budge on price following the Expo 2020 win, which increased the value of properties. In particular those in the higher priced segment, added Stevens.
When it comes to apartment sales, the top performers in the second quarter of 2014 were the Downtown Dubai and Jumeirah Beach Residence areas, which saw an 11 per cent rise to Dhs3,300 and Dhs2,000 per square foot respectively. While Dubai Marina and Downtown Dubai led year-on-year growth at 62 per cent and 52 per cent respectively.
Jumeirah village also saw a 46 per cent year-on-year growth with an increase of Dhs300 to touch Dhs1, 100 per square foot. Dubai Silicon Oasis and Dubai Sports City are currently selling for Dhs800 per square foot.
Meanwhile, in terms of villa sales, areas such as Victory Heights and Palm Jumeirah saw an eight per cent and three per cent increase respectively. Over the last 12 months, the Palm Jumeirah area saw a significant 55 per cent increase, stated the report.
However, with a slew of major residential projects entering the market, and government regulations aimed at cooling the market being implemented, such as the federal mortgage cap and increase of property registration fees, the market may be tested, stated Stevens.
“We anticipate that post the summer months, there are likely to be several new project announcements that will test demand in the market, giving buyers new opportunities to invest,” he remarked.