Affordable communities such as Discovery Gardens and International City saw rents falling 11 per cent and four per cent, respectively, in the second quarter 2011 compared to the first quarter, while upmarket locations such as Palm Jumeirah, Downtown Dubai and Jumeirah Beach Residence remained relatively stable, according to a new report.
Asteco, a Dubai-based property management company, said apartment rents fell two per cent on average for a number of areas across the emirate as large number of tenants started moving from two and three-bedroom apartments to townhouses, or small villas.
“This will eventually result in landlords having to adjust rental levels for larger apartment types in order to retain or attract tenants,” the report said.
The steep rental decline in Discovery Gardens, which has 245 buildings, is attributed to Nakheel releasing a number of buildings/apartments in the project.
The Dubai-based master developer is currently leasing a studio for Dh25,650 and one-beds from Dh34,200 for a 14-month contract.
According to Asteco, Dubai Marina and Jumeirah Lakes Towers (JLT) have witnessed some softening in rents due to significant supply being released in the past few months and expected completion of more projects.
Emirates 24|7 reported in June that no projects have been cancelled in JLT and eight new towers will be completed and handed over by December.
Meanwhile, apartment sales prices fell three per cent on average due to continuous handovers of real estate projects and the resulting widening of the supply and demand gap.
Villa rents remain stable
Villa rental rates have been relatively stable over the last three months. New villa developments such as The Villa and Jumeirah Village, are gaining popularity due to the large unit sizes, competitive rates and improved road network, resulting in short travel times into the city.
Although still favored, established communities such as Emirates Living will need to adjust their rates and terms to remain competitive, Asteco said.
Office prices decline
Office rental rates declined by two per cent while sale prices fell six per cent in the quarter due to increased availability.
Demand for units in proximity to the Metro has increased, but affordability still precedes location, especially for back office operations, which deters potential tenants who are not in the position to pay the premium.
Companies located in the original central business district (CBD) – Bur Dubai and Deira - are moving south towards Sheikh Zayed Road, DIFC and Business Bay. Tecom, Dubai Internet City, Dubai Media City, Knowledge Village and JLT are also benefiting from the relocation as “secondary” CBD.
Sale prices in Business Bay and JLT declined by 11 and 12 per cent, respectively, due to ongoing construction and the significant amount of supply expected in the short- to medium term.
“The overall transaction activity in the office sales market is minimal,” the consultancy said.