Will Dubai Rents Really Fall in 2015?

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Dubai residential market will continue to stabilize this year and reflecting sales prices, rents are expected to remain flat and even see a decline of up to 10 percent. But some experts point out that despite the new supply, rents in some areas will increase over the course of the year. So, will Dubai rents really fall in 2015?

During a conference on Tuesday in Dubai, Jones Lang LaSalle announced the release of the 8th annual “Top Trends for UAE Real estate Report”, which concludes that the residential market in Dubai has stabilized, while the price bubble has been “deflated”. Average residential prices are expected to stay flat and even fall by up to 10 percent in some areas. Following the trends in sales, Dubai rents in will also see a drop of about 10 percent.

The predictions are made after analyzing various factors, but there are several major signs that led researchers to such conclusions. There was no increase in Dubai real estate sales prices and rents in the last quarter of the year, while there was a negative impact on market due to the lower oil prices in the recent months.

Another driving force for stabilization in the sector is the significant supply, expected to curb the strong demand, especially when it comes to more affordable housing – the researchers have estimated that Dubai will receive approximately 25,000 new housing units by the end of 2015, if all projects are delivered on schedule.

However, rental rates are based on the rental index, reviewed and moderated by Dubai’s Real Estate Regulatory Authority (RERA), which offers average rent rates by location and property relative size. The latest index indicated that rents have risen in major residential communities between 6 and 25 percent from the final index update of 2014. Also, not all landlords follow the suggested rates of the index, but stick to the amount they want for the particular property. Even if there are some declines, home owners won’t offer a discount to tenants at the time of agreement renewals.

New tenants, on the other hand, can expect lower rents in some areas of the city, which are less developed and convenient. The amenities and the overall quality of the home and the area, where it is located, can actually influence prices and tenant interest more than the typical new versus old home. Apartments in more established areas such as Downtown Dubai and Dubai Marina may be more popular and expensive than new units in newly-constructed buildings that lack good surrounding infrastructure. So, the new supply is not a guarantee for a decline in prices, and experts say that oil prices will eventually go up, and deep declines in the residential rent rates across Dubai are highly unlikely.

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