Which of Dubai's high-end areas more affordable to rent in Q2?

Rents in some of Dubai’s high-end areas declined during the second quarter even as certain mid-market locations saw rentals increase while rental levels remained unchanged in old Dubai areas, according to two research reports published on Tuesday.

According to real estate consultancy Asteco’s Q2 2015 report, the highest quarter-on-quarter apartment rental declines were recorded on Sheikh Zayed Road (seven per cent), Palm Jumeirah (six per cent) and Jumeirah Beach Residences (seven per cent).

Conversely, IMPZ, Dubai Sports City and Dubai Silicon Oasis recorded higher rentals compared with 2014, of between 6 and 13 per cent, due to the completion of community infrastructure and increased occupancy levels making them popular mid-market residential areas.

Apartment rents across the city declined by an average of twi per cent in 2015 and five per cent for villas, with marked declines at the higher priced end of the market, Asteco said.

CBRE, another real estate consultancy, said Dubai’s rental market recorded marginal deflation during Q2, posting its first quarterly drop since 2011.

Rentals within the villa market saw the steeper decline, falling by an average of 3 per cent as compared to a 2 per cent dip in apartment rentals.

“Higher-end areas, including Dubai Marina, JBR, Palm Jumeirah, Greens and JLT, have actually suffered some of the heaviest declines with rental rates falling between one and four per cent,” CBRE said, adding that rates in many secondary locations remained unchanged, including Al Nahda, Hor Al Anz and Discovery Gardens, reflecting the continued flight to affordability.

“As the pace of rental declines picks up pace, we would expect to see a gradual reversal of this trend as occupiers start to focus on quality, although this is unlikely to emerge until 2016,” CBRE analyst said in the note.

John Stevens, Managing Director, Asteco, said: “The softening in Dubai’s residential rental market appeared earlier than we originally anticipated, offering tenants in the emirate an opportunity to recoup somewhat after several tough years of high rents. The decrease was felt throughout the market and areas with a significant amount of completed new supply were the most affected. Additionally, some buyers of nearly completed buildings were keen to sell at negative premiums due to the imminent completion of the building, which required final payment.”

In the villa segment, the handover of projects like Casa Villas at Arabian Ranches brought rental rates for the area down by seven per cent quarter-on-quarter, and 15 per cent year-on-year.

“We even saw a six per cent decline for Palm Jumeirah, with the handover of the lower specification Palma Residences’ townhouses impacting rental rates due to their lower price band. So we are seeing a similar tenant-friendly trend in the broader villa market, with more flexible instalment plans for example, and this is set to continue as areas like Dubailand continue to deliver new supply,” noted Stevens.

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