Rents in Dubai’s residential sector continued to drop in the fourth quarter of 2018, according to the latest report from real estate services firm, Chestertons.
Apartment and villa rentals were down 12 per cent and 8 per cent respectively in Q4 2018, compared to the same period in 2017. On a quarter-on-quarter basis, rents declined by 4 per cent and 3 per cent for apartments and villas respectively, the report stated.
Apartments in Dubai Marina, Dubai Silicon Oasis, Dubai Sports City, Dubailand and International City, witnessed a 5 per cent q-o-q decline in Q4, with a one-bedroom in Dubai Marina now available for Dhs82,500.
Downtown Dubai, JLT, JVC and Dubai Motor City all declined by 4 per cent from the previous quarter with a one-bedroom in Downtown Dubai now available for Dhs95,000.
Established communities, “offering good facilities at affordable rents” such as DIFC, Business Bay and Discovery Gardens witnessed a small movement with a 1 per cent decline from Q3.
Year-on-year figures show that DIFC was the most resilient location to rental declines most likely due to its unique positioning within the CBD where limited new stock has been added, the report said.
“Due to the increasing stock of smaller format and studio apartments, these units appear to be most affected by market adjustments,” the report found.
Studios and one-bedroom units recorded a year-on-year drop of 16 per cent and 12 per cent respectively in Q4.
In the villa rental market, the highest quarter-on-quarter declines were witnessed in three-bedroom units with average rental declines of 4 per cent.
The biggest average rental decline was seen in Al Furjan, where rents fell by 7 per cent from Q3. A three-bedroom unit in the community is now available for Dhs138,000.
In Arabian Ranches and JVT, average rental rates fell by 4 per cent and three-bedroom units are now available for Dhs160,000 and Dhs150,000 respectively.
The most resilient locations on a quarter-on-quarter bases were found to be Palm Jumeirah, Jumeirah Islands, The Lakes and The Springs with declines of 1 per cent.
Year-on-year, the biggest average rental adjustments were seen at Palm Jumeirah and Al Furjan – both with a 13 per cent drop from 2017. The most resilient locations in 2018 were JVT, Jumeirah Golf Estates and The Lakes witnessing 4 per cent declines from the previous year.
“Due to additional stock being available and limited new demand, landlords have had to compete, not only on rental rates but have had to introduce incentives to attract and retain tenants,” said Chestertons.
These incentives include multiple rent cheques – including monthly payments, rent-free period, the waiver of security deposits, multiple cheques to cover utility bills and short-term leases. In some cases landlords also cover the cost of agency fees.
“From a rental perspective, Dubai continues to be a tenant-friendly market, with many making significant savings by renegotiating terms and price with current landlords or moving to a cheaper location within their current district or relocating to a new community,” said Ivana Gazivoda Vucinic, head of Consulting at Chestertons MENA.
“We expect rents to continue softening into 2019 as a consequence of additional supply being added to the market where tenants are now seeing better value for money and greater levels of availability across the board,” said the report.
The current situation could also result in landlords taking advantage of the holiday let market, which has been legal in Dubai since 2016.
“With demand for annual contracts weakening and rents continuing to fall, short-term holiday rental could prove very lucrative, especially in popular locations, particularly as we edge ever closer to Expo 2020,” said Vucinic.