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19 March 2024

Tenants relocating to Northern Emirates

Published
By Parag Deulgaonkar

The flight to affordability will increase as tenants will continue to moving to Northern Emirates as residential rentals will continue to see rise throughout 2014, according to CBRE.

“With sustained demand for both occupational and investment properties, we anticipate that residential rental and sales growth will continue throughout 2014. However, we expect growth levels to be lower than 2013 performance as affordability becomes a more influential driver of property moves,” the real estate consultancy said in a new report.

“Consequently, we expect to see an increase in the flight to affordability, with occupiers starting to consider Sharjah and the Northern Emirates as a cost sensitive alternative to Dubai.”

The overall residential price index showed a rental increase of almost 20 per cent over the last year, with apartments registering an increase of 21 per cent, while villa rentals have grown by almost 10 per cent.

In April, Asteco, a real estate consultancy, said rents in Sharjah rose 38 per cent in the past one year and seven per cent in the first quarter 2014 compared to the fourth quarter 2013, driven by relocation of tenants from Dubai. Apartments in key residential areas such as Al Nahda, Mina and Al Wahda saw average rent increase by 10 per cent to 11 per cent in the first quarter.

Strong investor demand

According to CBRE, the residential market in Dubai continues to experience strong demand from both occupation and transactional sources, but there has been a slowdown in the number of transactions for completed properties.

Despite recent regulatory changes, both rentals and sales prices continue to rise, albeit at a marginally slower rate than was recorded during the previous quarter.

The residential development pipeline is still increasing, with a rising number of new projects being launched month by month.

“While this pipeline is still far smaller than witnessed during the last cycle, it is nonetheless growing quickly and is certainly something to monitor carefully, with a danger that further down the line supply could again start to exceed demand fundamentals,” CBRE said.

17,000 new units

During 2014, nearly 17,000 new units are expected to be completed with the majority of being delivered in secondary locations such as Dubailand, Jumeirah Village Circle and Silicon Oasis.

“Over the next four years roughly 65,000 new units are penned for completion, with 83 per cent of these apartments, and villas and townhouses comprising the balance,” the report added.

Quarter-on-quarter, rental growth has been more marginal at around 3.2 per cent, with apartments rising by 3.6 per cent and villas by 1.4 per cent.

The strongest sub-markets for apartments were Business Bay, The Greens, Sports City, International City and Motor City.

For the sales market, the quarterly change in sale prices was registered as a little over 5 per cent, the same figure that was recorded the previous two quarters, suggesting that demand remains strong despite the implementation of higher transaction fees.

On an annualised basis, prices are now 31 per cent higher than the same period last year. Similar to the leasing market, growth was strongest amongst the more budget-focussed locations, including International City and Jumeirah Village Circle, CBRE said.