The sharp rise in residential rents in Dubai during the first quarter of this year is unsustainable, a property expert has warned.
Dubai’s apartment and villa rents grew by five and three per cent respectively in Q1 2014, according to an Asteco report.
“This continued rise in rents could herald the start of a flight to affordability for budget sensitive Dubai residents, who may well consider relocating to Sharjah, Ajman or further afield in the Northern Emirates,” said John Stevens, managing director, Asteco.
International City and Jumeirah Lakes Towers saw the largest growth in rents during Q1 2014 while leasing rates in Dubai Marina grew by 10 per cent.
In the villa sector, The Springs sported the largest rent increase as it grew by 13 per cent, the report said.
Dubai’s residential sales prices were also found to have stabilised during Q1 2014 following a spike in prices after the Expo 2020 announcement, Asteco said.
Apartment and villa sales prices grew by three and six per cent in the first quarter compared to Q4 2013.
“There were significant increases in unit prices in Q4 2013 following news of Dubai’s Expo 2020 win and we saw deals flounder as sellers with genuine offers decided to wait in anticipation of further growth,” said Stevens.
“Transactions slowed down in established communities where surging prices went beyond what buyers were willing to pay.
“Now we are witnessing growth in secondary residential areas, which are attracting prospective purchasers looking for more sensible asking rates with potentially better growth potential,” he added.
However, the report also warned of a rising investor interest in off-plan developments offering attractive payment plans as buyers face a higher cash requirement.
More than 3,000 units were launched in Q1 2014, Asteco said. Notable off-plan apartment projects include Mulberry Park Heights at the Mohammed Bin Rashid City, Atria in Business Bay, Palm Tower Residences on Palm Jumeirah, and Celestia Serviced Apartments at Dubai World Central.
Some of the new villa units launched in Q1 2014 included Yasmin and Rasha at Arabian Ranches, Mira Oasis at Reem and Trump Estates at Akoya.
DIFC apartments recorded the steepest rise in sale prices at nine per cent followed by Jumeirah Lakes Towers, where prices rose by eight per cent.
Among villas, Nakheel developments Al Furjan and Jumeirah Village saw the largest hike in sales prices during Q1 2014, the report said.
“We anticipate this trend to continue throughout 2014 but with more moderate sales price growth forecast for the second half of the year,” said Stevens.