Villa rents stable, 2% decline in apartment and office rents –sales prices down 3% for both villas and apartments, says Asteco Q2 2011 report
The Dubai property market carried on where it had left off after the first quarter of 2011, with only minor sales price declines of 3% for apartments and villas. Apartment rental rates dropped by 3% but there was little or no change in the rental rates for villas, according to the Q2 2011 report from leading UAE property management company, Asteco.
Apartment rentals averaged a decline of just 2% during the second quarter, though drops of as much as 11% and 4% were seen in Discovery Gardens and International City due to the large amount of units available in these areas. In fact Nakheel recently released a significant number of apartment units in Discovery Gardens, impacting rents.
“Over the last three months we have seen some positive developments such as the extension of the property visa period from six months to three years and the implementation of the International System of Units, which will bring uniformity of scale to the market,” said Elaine Jones, CEO, Asteco Property Management.
“Both are steps in the right direction and represent the government’s commitment to increasing transparency and confidence in the market, which will encourage investment,” she added.
Overall, the report found apartment rents softened due to continuous handovers causing a downward effect on rentals, with rates in Dubai Marina and Jumeirah Lakes Towers declining by 3% and 1% respectively.
One interesting trend mentioned in the Asteco report was the migration of tenants from two-or three-bedroom apartments to townhouses or small villas and should this trend continue, landlords will have to adjust rates and terms for larger apartments to retain or attract potential tenants.
Villa rentals fared better and were relatively stable over the last three months. Mirdiff was the only area surveyed that experienced a minimal fall in rates with 2%, which was due to a large amount of villas in Shorooq coming onto the market. New villa developments along Emirates Road are gaining in popularity, with large units, competitive pricing and an improving road network.
Looking ahead, rental rates are expected to decrease slightly in the short-to-medium term consistent with the delivery of new villa developments such as Jumeirah Park, which is expected to be partially handed over by the end of 2011.
Overall apartment sale prices in Dubai during the second quarter, declined by 3% due to an influx of stock, overshadowing demand. Another trend picked-up by the report was tenants with respectable housing allowances opting to use the money to buy a property rather than rent one.
According to the report there was little movement witnessed across villa sales, with an overall decline of 3%. End-users are now beginning to drive the Dubai market as reduced sales prices and better financing options appeal to residents who are taking a longer-term view of living in Dubai.
The overall transaction activity in the office sales segment was minimal, recording a decline of 6% during the second quarter. The anticipated issuing of a new companies law that was expected to increase the percentage of foreign ownership in some companies has been delayed and in certain cases been dismissed.
“The law, if materialized, is expected to attract foreign direct investment and boost the local economy and employment,” said Jones.
Office rental rates experienced minimal declines of 2% mainly due to the increased availability of office units. However, despite increased enquiry levels, rental rates will continue to decline as supply is expected to outweigh demand in the short-to-medium term.