Residential rents in Sharjah surged 23 per cent during the first nine months of 2014 due to a limited supply pipeline and comparative affordability to Dubai, a new report found.
Rents in Sharjah rose 5.3 per cent in the third quarter, marginally lower than 5.7 per cent year-on-year growth recorded in Q2 2014, according to the report author, real estate consultant Cluttons.
Apartments continued to see strong demand as rents rose by 35 per cent in the 12 months to the end of Q3, Cluttons said.
Tenant demand in the residential market was found to be largely fuelled by reverse migration from Dubai and Dubai firms increasingly turning to Sharjah for bulk staff housing.
“The strength of tenant demand continues to outstrip available supply, fuelling the strong rental value growth recorded across the city,” Cluttons said.
“While there has undoubtedly been a sharp increase in the number of project starts, as evidenced by the surge in valuation and feasibility requests we are receiving, the expanding supply pipeline will not be delivered to the market in the near term.”
Meanwhile apartment rents climbed by 29 per cent in the first nine months of 2014 with the rate of rent acceleration slowing to just under seven per cent in Q3, from 8.2 per cent in the second quarter.
Although there was a slight deceleration in the growth rate, Cluttons noted that villa rents were breaching the affordability cap, as they were not keeping pace with household incomes.
“Overall, the behaviour of the lettings market in Sharjah mirrors what has already occurred in the lettings markets in both Abu Dhabi and Dubai and we expect this to persist as affordability issues start to limit the strong rental value growth we have recorded over the past 18 months,” the report added.
Developers have been tapping into Sharjah’s growing real estate sector with the launch of new projects fuelled by a change in ownership rules.
Earlier this year, UAE-based firm Al Thuriah announced plans to construct two high-rise residential towers in Sharjah, close to the border with Dubai.
Sharjah also launched a Dhs2 billion mega project called Tilal City- a mixed-use community being developed over 25 million square feet, off Emirates Road. The project will allow foreign ownership in the emirate’s real estate sector.
“As the government continues to ease restrictions on foreign ownership, developers are increasingly turning their attention to gated communities in an effort to match the developments seen in suburban Dubai,” the report said.
“The emergence of such freehold schemes will pave the way for investors looking to enter a market where average home values are roughly two-thirds lower than that of Dubai. However, without a proven track record, development financing is likely to remain challenging, at least in the near term.”