Dubai’s Rents To Soften In 2015 Due To Increasing Supply

About 12,000 apartments and over 2,000 villas will be added to the city’s existing inventory in 2015, Asteco said.



Dubai’s residential rents are poised to soften in 2015 due to additional supply entering the market, according to a new report by property consultant Asteco.

“A further 12,000 apartments will be added to the city’s existing inventory in 2015 as well as over 2,000 villas,” said John Stevens, managing director, Asteco.

“This is good news for tenants across the emirate, and a more tempered rental environment is especially welcome when you consider that since 2011 apartment rents have increased by 65 per cent and villas by 55 per cent.”

Although the rate of growth in rents slowed in 2014, apartment rents still grew by seven per cent while villas showed a rise of four per cent, the report said.

The impact of tenants choosing to remain in their accommodations rather than relocate to another location has also contributed to the slowdown in the growth of rents, Asteco added.

The citywide annual average for a two-bedroom apartment in Dubai was Dhs122,000 at the end of 2014, with an average six per cent year-on-year rental rate increase recorded in Q4 2014.

Meanwhile, villa rental rates are anticipated to remain relatively stable in prime areas this year while there will be marginal declines in less desirable areas, the report said.

“Looking beyond this year, a more significant drop in rental rates could be on the cards from 2016 onwards as the large number of projects announced in 2013/14 (an estimated 12,000 to 14,000 villa units) are completed,” said Stevens.

On the sales front, the market witnessed a slowdown with a 25 per cent fall in villa and apartment transactions in 2014 over 2013 figures due to reduced risk appetite, new lending regulations and fees making the purchase process more expensive, the report said.

Transactions fell by 40 per cent year-on-year in Q4 alone while off-plan sales also slowed due to a rise in completed products in the market, according to Asteco.

Dubai’s house prices and rents have fallen considerably in Q4 2014 after growing almost 56 per cent over the last few years, JLL said.

A report by the property consultant predicted that average residential prices will either remain flat or decline in 2015, entering a period of stability.