Dubai Q2 apartment rents fall by 16-26%

Average rents for apartments in Dubai declined by 16 to 26 per cent in the second quarter compared to the first quarter, while office rents fell on an average by 20 per cent during the same period, said a new report. Studios saw the maximum decline of 26 per cent with average rentals coming down to Dh45,500 from Dh61,500 in the first quarter. During the same period, one bedroom rents fell 16.13 per cent to Dh78,000 from Dh93,000; two-bedroom rentals fell 18.94 per cent to Dh107,000 from Dh132,000; while three-bedroom rents dropped 19.19 per cent to Dh149,500 from Dh185,000, Asteco said in its second-quarter report on Dubai property market. "As rental rates continue to decline, residents are moving from older buildings in less desirable locations to quality units in New Dubai, such as Dubai Marina, Jumeirah Beach Residence and Discovery Gardens. This is particularly the case where single occupants and small families are concerned, as the moving costs are lower, and they are usually more flexible than larger families." Average rents for villas were Dh119,000 for two-bedrooms; Dh176,500 for three-bedrooms; Dh233,750 for four bedrooms; and Dh277,000 for five bedrooms. New Dubai reported a lower fall in values as many buyers and tenants seek quality residential units in completed community projects. As a result, prices in developments such as Downtown Burj Dubai, Dubai Marina and Emirates Living are seeing early signs of stability. With the increasing number of projects being handed over, owners are reluctant to sell at a reduced cost and are, therefore, leasing their units or moving into their own units to save up on rents. Andrew Chambers, Managing Director, Asteco, said: "Those working in Abu Dhabi are increasingly exploring residential units in New Dubai due to its proximity to the UAE capital. While tenants are seeking units in community developments, demand has mostly been for one- and two-bedroom apartments and for three- and four-bedroom townhouses." Established communities such as Jumeirah Beach Residences (JBR), Downtown Burj Dubai and Springs have seen the most enquiries from tenants and consequently, the rents in these neighbourhoods have been least affected by the decline. Average sales prices of apartment and villa decreased by 15 and 13 per cent, respectively, representing a significant slowdown in negative growth compared to the quarter-on-quarter decline from the fourth quarter of 2008 to the first quarter of 2009. Apartment sale prices declined from an average of Dh1,000 per square foot to Dh900 per sqft; whereas villa prices dropped from Dh1,130 per sqft to Dh980 per sqft. Enquiries and transactions have increased over the last three months, with buyers primarily seeking units in well-established and well-located developments with complete infrastructure and community facilities. The market is driven by end-users and long-term investors who are motivated by value maximisation, namely the best price for a high-quality home in a completed community. As a result, prices in developments such as Downtown Burj Dubai, Dubai Marina and Emirates Living are showing early signs of stabilisation. As property prices see stability and financing restrictions relax, Palm Jumeirah reported a surge in sale prices for villas and apartments by 20 per cent and seven per cent, respectively, in the second quarter. However, rents on the development declined by 12 per cent and 25 per cent for apartments and villas. Companies looking for premium office spaces in Q2 gained an upper hand with sale prices for offices declining by 24 per cent over the corresponding period. Most office property owners preferred to hold on to their completed assets rather than selling them, to benefit from a long-term rental income stream. Sales prices for offices decreased from Dh1,550 per sqft on an average to Dh1,120. The biggest sales prices decreases were seen in Downtown Burj Dubai (37 per cent) and Dubai Sports City (60 per cent); while marginal drops were reported in Dubai Marina, Downtown Jebel Ali and Dubai Silicon Oasis. The downturn also caused commercial rents to decline by an average 20 per cent. Sheikh Zayed remained the least affected with many offices moving to the area from less desirable locations in the face of falling rents. Asteco anticipates prices of office spaces on this stretch to pick up in the coming months with the scheduled beginning of the Metro services in September. Landlords have yet to adapt to the current climate and offer incentives such as parking spaces and rent-free periods at the beginning of leases, although some are offering flexible payment plans, the report added. Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here .