Abu Dhabi relocation will not lower Dubai rents

Relocation of Abu Dhabi government employees is likely to bode well for landlords in Dubai since occupier demand for residential properties remains “incredibly strong”, says a top property consultancy.

“In a rising market, landlords will often be happy to see old tenants vacate as it provides an opportunity to raise rents to parity with current market levels without having to contest rates with Real Estate Regulatory Agency, or consult the rent index,” Matthew Green, Head of Research UAE, CBRE Middle East, told Emirates 24/7.

Currently, landlords in Dubai can only increase rent as per the index issued and updated by Real Estate Regulatory Agency (Rera), provided the landlord gives a 90-day notice period. Therefore if an existing tenant vacates, the landlords can easily lease the unit at the market rate.

Although government stats reveals the number of employees and their families who live outside the emirate at 23,000, Green believes these movement won’t have any impact on rents, at all.

He asserts that occupier demand in the emriate’s residential sector remains “incredibly strong”, with rental growth continuing unabated in established locations as the economic recovery drives renewed population growth.

“The buoyancy of the sector is likely to help insulate against the occurrence of lower rents, although we could see some pressure released on areas around Dubai Marina, Jumeirah Lakes Towers, Tecom and Discovery Gardens communities, which have become very popular amongst commuters to the capital.”

This website reported on Sunday that Abu Dhabi government-owned companies were sending reminders to their staff, asking them to relocate to the capital before September or lose out on their housing allowance.

One company circular, which was seen by website, stated: “Staff currently living outside the emirate of Abu Dhabi will have a one-year grace period from September 2012 to relocate to the emirate in order to be eligible for housing allowance after September 2013. Those who wish to remain resident outside Abu Dhabi beyond September, 2013 will not be entitled to any housing allowance.”

Asked if landlords will reduce rents to find a replacement tenant, Green asserts: “In a rising market, landlords will often be happy to see old tenants vacate as it provides an opportunity to raise rents to parity with current market levels without having to contest rates with Rera or consult the rent index.”

Last year, Bank of America Merrill Lynch said Dubai’s active population will grow by 6.1 per cent on average over the next eight years, faster than residential supply, which is set to grow by 4.9 per cent over the next two years.

Citibank has also said that rapid population growth in the UAE had led to a relative tightening in the housing market before 2009 with demand outpacing supply.

In February, Dubai Statistics Centre said population in the emirate had increased by five per cent to 2.1 million in 2012.

CBRE expects the emirate will witness fresh supply of nearly 36,000 new residential units in the next three years.

"We expect around 36,000 new residential units (apartments and villas) could enter the market during the period 2013 to 2015 provided that construction delays are minimal," Green said.

However, Asteco Property Management, in its second half 2012 report, had put the number at 44,400 units in 2013.

"Assuming construction schedules are adhered to as at the time of inspection, we believe 2013 will see 39,000 apartments, 5,400 villas," it said.

 

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