'Dubai Property Report': Rent-free periods likely

Landlords in Dubai are likely to offer rent-free periods as new housing supply comes in putting rents under pressure, according to a global real estate consultancy.
 
“The leasing market which has remained stable over the past three quarters is expected to witness increased landlord incentives in the form of rent-free period and other allowances, while rental declines are also likely in some areas,” said Mat Green, Head of Research & Consultancy UAE, CBRE Middle East, in the first quarter ‘Dubai Property Report’.

“The markets relative stability during the past nine months is reflected in the huge swing in growth figures from 27 per cent in the year to Q1, 2014 versus three per cent in the year to Q1, 2015,” he added.

The average decline and increase in apartment rents was in the range of one to three per cent.

Apartment rentals witnessed decline in Al Nahda, Al Barsha, International Media Production Zone (IMPZ), MotorCity and Liwan, however, Jumeirah Lakes Towers, Discovery Gardens and Karama bucked the trend.

In the villa/townhouse segment, lease rates remained largely unchanged during the first quarter, with smaller two-bedroom units registering increase of around one per cent.

Three to five bedroom villa declined by nearly one per cent due to an increase in the supply of villa units — a trend likely to gather pace over the next 12 months.

The most significant decline were seen in Jumeirah Village and The Villa, Dubailand, which dropped thee per cent and four per cent, respectively.

The consultancy said the villa market saw an addition of 3,000 new units during 2014. No number was given on new apartments released.

In January, JLL, a real estate consultancy, said Dubai residents could expect rental declines this year, with even rent-free periods being offered to tenants. Later, Knight Frank, a UK-based consultancy, said residential rents are likely to fall by five per cent, while property prices will be down by 5 to 10 per cent in 2015.

Asteco, a real estate consultancy, said earlier that rents will not only soften in 2015, but a more significant drop in rental rates could be on the cards from 2016 onwards as a large number of projects announced in 2013/14 (an estimated 12,000 to 14,000 villa units) are completed.

Read: Dubai rents softening; bigger decline next year?

Volume rise q-o-q

Residential sale transactions registered a “significant” drop in overall value terms year-on-year, falling 20 per cent, as volumes declined by around 4 per cent.  But on quarter-on-quarter basis, there has actually been a rise in both transaction values and volumes. 

During Q1 2015, total sales transactions were valued at Dh6.39 billion with 3,896 transactions compared with Dh4.55 billion and 2,573 deals during Q4 2014. 

“… it was not sufficient to avoid a decline in average sales rates, which fell by around 2 per cent over the quarter,” the report said.

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