In the rental market, Cluttons expects continued moderation during 2017. The consultancy forecasts rents to end the year 5% to 7% lower than 2016, but like the sales market there is growing potential for a more stable picture to emerge, as the Expo effect starts to filter through. Villa rents are expected to end the year 10% down on 2016, while apartments are expected to demonstrate greater stability, with virtually no change in average rates when compared to 2016.
Murray Strang, head of Cluttons Dubai, said: “Our view is that the rental market’s fortunes remain tied to the looming Expo 2020. At this stage, the mega event is one of the primary upside risks to our outlook, especially as we expect it to drive up the rate of job creation and tenant demand, but this is not expected for another one to two quarters at least.”
As has been the case for more than 18 months now, Dubai’s office market continues to buck the trend being observed elsewhere in the property market, with rents remaining relatively resilient.
Durrani commented: “In general, we believe that rents will largely remain unchanged over the rest of 2017, with any declines likely to be contained at 5%. The looming VAT regime, however, which will see corporate occupiers liable for a 5% tax, based on their annual lease rates, may upset the stability the market has enjoyed recently, particularly in more secondary locations. Nonetheless, it is expected that many occupiers will have begun to price this into their plans for 2018, suggesting that the flat outlook may well persist for a year longer than it was originally anticipated before the Expo 2020 effect starts impacting demand and improving the rental growth profile of the city’s office market.”
Speaking on the performance of more prime locations, Strang commented: “DIFC continues to be the stand out performer with rents remaining the priciest in the city. While it has already stamped its authority as the region’s foremost financial business hub, the planned addition of further Grade A stock, such as Emirates Towers Business Park, will intensify demand and help transition the financial centre from a regional hub to a global one.”