Residential rents across Dubai grew just three per cent in the first quarter of 2015, registering a major slowdown from the 27 per cent in the same period last year, new research has shown.
According to a report from real estate consultancy CBRE, rental inflation in the emirate has been tempered, with rates for apartments and villas stabilising.
Apartment rates in Dubai have seen a drop or gain between one and three per cent in the quarter, CBRE said.
Districts such as Al Nahda, Al Barsha, International Media Production Zone, Motor City and Liwan saw a drop in rates while Jumeirah Lakes Towers, Discovery Gardens and Karama saw gains in the first quarter.
The decline in rental rates was mainly attributed to new supply and traffic related issues, whereas areas that saw growth benefitted from improved infrastructure and better retail facilities.
The demand and supply imbalance over the past nine months has led landlords to seek alternative ways to maintain prevailing market rents, CBRE said.
Some of the tactics used by landlords include offering a month-long rent free period or providing semi-furnished apartments at the normal rate, the report said. However, CBRE did not mention the areas where these offers were available.
Villa rental rates showed a marginal increase of one per cent in Q1 2015 due to supply coming into the market last year. Developments such as Jumeirah Village and The Villa saw a decline in rental rates.
“The delivery of a significant number of new units during 2015, will add further pressure to the residential market over the course of the year,” said Mat Green, head of research & consultancy UAE, CBRE Middle East.
“The leasing market which has remained stable over the past three quarters is expected to witness increased landlord incentives in the form of a rent free period and other allowances, whilst rental declines are also likely in some areas.
“The average sale rate for residential properties dipped by two per cent quarter-on-quarter and is expected see a further drop during the course of the year.”
CBRE also noted a significant drop in the value of residential sales transactions, which fell 20 per cent with volumes declining four per cent.
However, on a quarter-on-quarter basis, CBRE said there was a rise in both transaction values and volumes.
Dubai’s property prices and rents, which surged more than 30 per cent in 2014, have recently been stabilising due to government measures, that were introduced to cool the market, and increased supply.