Dubai’s established residential locations, such as Dubai Marina, Emirates Living, Palm Jumeirah and Downtown Dubai are witnessing steady growth in rental and occupancy rates goaded by strong investor and occupier demand.
In its first quarter report, property consultancy CBRE stated that on average, a two bedroom unit in these locations has witnessed a 27 per cent increase in rent year-on-year, with the largest single jump seen in The Greens, where rental rates rose by over 40 per cent.
Average rents for villas also rose five per cent during Q1, with smaller two and three bedrooms units seeing higher growth of nine per cent and seven per cent respectively, said the report.
Townhouse projects such as the Springs are also seeing rental hikes of over 25 per cent, with a three bedroom property currently averaging Dhs165,000 per unit per annum, as compared to Dhs125,000 per unit per annum at the same point last year.
“The residential sector has maintained positive momentum amidst solid market fundamentals and steady economic growth,” said CBRE.
“However, there is a modicum of concern that the recent escalation of sales and leasing rates could actually be a little ahead of reality.
“One of the key drivers of this disconnect during the past 18 months has been the substantial return of foreign investment and speculator/investor activity. This is a trend that has been particularly evident at recent off-plan sales launches.”
Many of the recent project launches by developers such as Emaar and Damac in Dubai – all off-plan – were sold out on day one.
According to the Dubai Land Department, a total of 3,547 residential transactions worth Dhs4.7 billion were recorded in Q1 2013, compared to 2,726 transactions worth Dhs3.1 billion in Q1 2012.
The emirate’s established locations recorded 60 per cent of all the transactions, with Dubai Marina registering the maximum number of deals – 25 per cent of the total share.
“The current rate of growth will have to be monitored quite closely and with a certain degree of caution, with some residents already starting to feel the pinch of the rising cost of living,” said CBRE.
“This is a factor that if not mitigated through new supply and further regulation and intervention, could eventually impact upon Dubai’s competitiveness as a burgeoning global business environment,” it added.