Sharjah residential rents fall 19% in first quarter

Residential rents in Sharjah fell 19 per cent in the first quarter of 2009 compared to the fourth quarter of 2008 with vacancy rates rising as people move to affordable areas in Dubai, real estate experts said.

Offices rents dropped by nearly 34 per cent in the same period.

"Rental prices in Sharjah apartments recorded a drop of 19 per cent during the first quarter. Al Yarmouk continues to be the most affordable location in Sharjah with average rentals of Dh40,000, while Al Khan commands the highest rental rates across the board, averaging Dh51,300 per annum," said Khaldoun Kamal, Manager – Sales & Leasing, Sharjah & Northern Emirates, Asteco Property Management.

"The Sharjah villa market has also been hit. However in comparison to the apartment market, the villa market has seen a drop of 18 per cent in the quarter," he added.

According to a recent report from Asteco on the Northern Emirates for the first quarter, the three-bedroom villa market has shown the largest decrease of 21 per cent, while rates for five bedroom-plus villas have declined by 16 per cent.

"Sharjah witnessed minimal decline in the three-bedroom market because of less movement in this sector than the one and two-bedroom market.

"Families in three-bedroom apartments preferred to stay temporarily on a month-by-month basis. Overall, Sharjah's apartment market has not seen significant decreases compared to other emirates such as Umm Al Quwain, where rental rates dropped by nearly 33 per cent," Kamal said.

According to Asteco, the commercial office market in Sharjah has been particularly hard-hit. Real estate rentals for offices have decreased by nearly 34 per cent from the fourth quarter of last year.

"A typical office building with good facilities and prominently located can now command rental rates of around Dh135 per square foot," said Kamal. "These offices tend to be found on the Al Taawun and Corniche roads. Offices of lower standards and which are situated in less desirable locations can achieve rental values of Dh65 per sq ft. With landlords offering attractive grace periods for long-term tenants, business opportunities in the emirate are now at a more affordable level."

Rose-marie Kilzi, Leasing and Re-sale Director, Great Properties, said Sharjah has been less affected than Dubai because it was never highly priced in the first place.

"While rental prices have dropped between 20 and 30 per cent in the last six months, sales prices have not been much affected since all of Sharjah is not freehold and only GCC nationals can register in the emirate for property," said Kilzi.

"However, the way the emirate has been affected is in the sense that prices in Dubai have dropped and people are now finding Dubai more affordable."

Rajesh Chandrasekharan, Chief Operating Officer, Gowealthy.com Research Wing, said in the first quarter of 2009, rents for residential units at select areas in Sharjah have dropped by 15 per cent to 20 per cent and those for commercial properties by 10 per cent.

"Sharjah's rental market has weathered the property crisis remarkably well. The emirate continues to attract expat tenants seeking quality yet inexpensive housing. The low cost of living, ever-improving amenities and the easing of traffic jams have prompted many expat families to stay put in the emirate, despite declining rents in neighbouring Dubai. We don't foresee a mass exodus to Dubai in the near future; but, of course in the event of a rent free-fall, many could shift. Studios and one-bedroom apartments continue to be in high demand," said Chandrasekharan.

"Expats prefer to stay on in Sharjah instead of shifting to Dubai because they are still wary of price fluctuations," he said.

Chandrasekharan said demand is still strong for buildings close to the Dubai-Sharjah border and in areas such as Al Khan, Al Nahda and National Paints Roundabout. "A studio in Al Khan for example commands Dh26,000 per annum, whereas the same property type could fetch Dh20,000 per annum in Al Rolla. In case of one-bedroom apartments, the prevailing rates vary between Dh30,000 per annum and Dh40,000 per annum in key areas," he added.

According to Asteco, prices for residential units start from Dh450 per square foot to Dh700 per square foot.

"In Al Mamzar area, residential prices start from Dh600 per square foot for an apartment. In Al Nahda, prices start at Dh450 per square foot and in the Nujoom Island project, prices start at Dh550 per square foot for villas," said Kamal.

"Sharjah market still not a freehold market to be opened for every nationality to own a property, hence sales got less affected than the open freehold market in Dubai, Ajman and RAK," he added.

Meanwhile, Kilzi said vacancy levels in Sharjah were growing between 20 and 30 per cent of the residential housing in the emirate.

"The market is small and is always dependent on the demand and supply. With prices dropping in Dubai, we expect further rental prices to drop in Sharjah especially since newer building are getting ready to be handed over in the emirate during this year," she said.

Vacancy rates for villas range from 10 to 15 per cent. "Demand for villas still exists but expectations in the coming months are for people opting to move to smaller accommodation. A possible outcome is downsizing of villas to apartments, where tenants can curb their expenses until confidence in the market is regained," said Kamal.

However, experts believe Sharjah continues to attract international investors.

"In stark contrast to Dubai and Abu Dhabi, the emirate caters to GCC investors, a majority of which are from Kuwait and Saudi Arabia. Although a late entrant, Sharjah is attracting appreciable investor interest. Sharjah has a modern international airport as well as domestic air carrier Air Arabia. It is also home to two free zones," said Chandrasekharan.

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