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Dubai tenants have the advantage in 2017, says Asteco
 
  • Asteco’s Q4 2016 report highlights expected downward pressure on rents caused by increased supply
  • Average apartment and villa rents down by 6% and 5% through 2016
  • Residential sale prices bottoming out

Dubai, UAE, February 13, 2017:  Tenants in Dubai could have the upper hand when negotiating rental rates thanks to a significant amount of stock coming to the market in 2017, according to the latest report from leading real estate consultancy Asteco.

There are 31,500 apartments and 12,500 villas and townhouses scheduled to be delivered this year in areas including City Walk by Meraas, Damac’s Akoya, Dubai Wharf by Dubai Properties and Emaar’s Mira. This is in addition to 8,750 apartments and 5,000 villas completed in 2016.

“Tenants will be offered a significant choice of completed properties in 2017 in both established and new communities,” said John Stevens, Managing Director, Asteco. 

“The additional supply will continue to put downward pressure on market rates, which will place the negotiating power firmly in the hands of tenants, despite a forecasted increase in population,” he added.

However, the gap between planned delivery and actual handover can be “worlds apart, which could limit the impact of oversupply and generate modest levels of growth in certain popular communities,” he said.

Figures in the Asteco Dubai Real Estate Q4 2016 report support the fact that the balance has been tipped away from landlords and it is the tenants who have the advantage when it comes to negotiating lease terms.

Although average apartment rental rates declined by 5% since the previous quarter and 6% over the year, the individual numbers indicate that the market is becoming increasingly fragmented. Whilst rental rates in certain areas declined, others were more resilient to change and even experienced marginal growth. It is also important to note that buildings within specific communities are showing disparities in terms of the overall offerings and hence rates.

The majority of areas have seen rental rates for one bedroom apartments drop AED5,000 to AED15,000. Units in Jumeirah Beach Residence are now available for AED105,000, Business Bay demands AED75,000 and International City reports AED45,000 on average.

As average one bedroom rents in Jumeirah Lakes Towers witnessed declines of AED15,000 over the year to AED75,000, rates in Downtown Dubai (AED115,000), The Greens (AED95,000) and Al Barsha (AED75,000) all held their rental levels year-on-year.

Average villa rents fell by 3% over Q4 and 5% year-on-year. Similar to the apartment leasing market, rents in areas such as Al Barsha and The Meadows saw double digit declines over the year as tenants relocated to newer, more affordable areas.

However, average rents for three bedroom villas in popular communities such as Jumeirah (AED190,000), Jumeirah Village (AED160,000) and The Springs (AED180,000) remained unchanged from a year earlier.

Two villa developments have crossed the AED200,000 mark for three bedroom units including Al Barsha and Arabian Ranches with villas available for AED 175,000 and 195,000 on average.

Stevens said: “Landlords, especially corporates, offered incentives such as increasing the number of cheques accepted and longer rent-free periods to entice take-up, especially in newly handed over communities that still lack supporting infrastructure, retail and leisure facilities. Single unit owners (especially those with mortgages) were more inclined to reduce rental rates to increase take-up, rather than undergo prolonged periods without any rental income.”

Overall, average sales prices remained relatively unchanged over Q4 and for the full year, which Stevens believes, “signals the bottoming out of the market”.
Although average sales prices of an apartment in Dubai Marina dropped compared with 2015, rates rose marginally over the quarter. Apartment sale prices in Jumeirah Lakes Towers, on average, held firm at AED1,150 per square foot.

In line with the apartment sector, average villa sale prices were generally flat over the last quarter, while the overall average annual change was minimal at -2%. Well established communities in prime locations such as Emirates Living and Arabian Ranches saw an average increase of AED150 per square foot, whilst rates for developments with more supply growth potential, such as Jumeirah Village, dropped by AED100 per square foot.

Stevens said: “Market sentiment is expected to improve on the back of increased government spending on infrastructure, hospitality and retail projects, which will have a positive effect on demand for real estate in Dubai.”

“The sales market will be increasingly driven by long-term investors and owner-occupiers and the rise in first time buyers will continue throughout 2017 as people take a long-term view to living in Dubai.”

Average office rental rates fell 3% year-on-year, while average sales also suffered a drop, of 5%. “Both office rental rates and sale prices will continue to come under pressure as new developments are handed over whilst demand is expected to remain low. Tenants and buyers will continue to expect attractive rates, incentives and flexible payment terms,” said Stevens.


Posted by : Dubai PR Network Editorial Team
Viewed 13243 times
PR Category : Real Estate & Retail
Posted on : Monday, February 13, 2017  2:47:00 PM UAE local time (GMT+4)
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