Dubai’s residential property market has stabilised, and its price bubble has been deflated, real estate consultancy JLL said on Tuesday.
Average residential prices are expected to see either flat growth or decline by up to 10 per cent this year, JLL said in its ‘Top Trends For UAE Real Estate’ report.
The rental segment in the emirate mirrors the sales market, and some areas are similarly expected to witness a drop in rents of up to 10 per cent, confirmed Craig Plumb, director Research at JLL MENA.
“For new tenants moving in, we expect landlords to keep the rents the same or reduce the rates,” he explained.
“For those already renting properties, their landlords are unlikely to offer a rental decrease, but they would probably start to offer additional things like maybe one month rent free, or better maintenance or new appliances, etc,” Plumb said.
Currently, rental rates in Dubai are based on a rental index moderated by Dubai’s Real Estate Regulatory Authority (RERA) along with the Land Department.
The index, established after Dubai’s property crash in 2009, currently offers average rental rates by property size and location. It covers all the areas in the emirate including freezones.
However, authorities are also studying proposals to introduce grading the properties by quality, in order to streamline the market better, confirmed JLL.
But it is unknown when these changes, if approved, will come into effect.
“It’s a discussion that the government is having – they are going through a consultation programme. We hope the changes will be implemented in the shorter term, but we can’t say for sure,” said Plumb.
Following Dubai’s property market recovery in 2011, rents in the emirate boomed, growing 15 per cent in 2014, according to JLL’s recent report.
A recent report by consulting firm ValuStrat also found that it is cheaper to buy properties in certain areas of Dubai as compared to renting them.
It said that analysis of a representative range of properties worth Dhs1.575 million or less in freehold locations across the city found that in some cases, monthly mortgages were cheaper than rents.
JLL Plumb’s agreed, stating that from a financial perspective, it may be more viable and profitable to buy property in Dubai.
“Some of the payment terms that the developers are offering are definitely more attractive as compared to rents – purely on financial terms,” he said.
“But of course you have got to make that commitment to Dubai – you must feel secure enough to want to be in Dubai for a longer period.”
That’s not necessarily a trend that’s picking up, he says.
“I think there will be two separate markets in Dubai – people who don’t want to buy and people that do. And it won’t necessarily be the cost that determines that,” he added.