Dubai rents rise fastest in the world

More people are considering purchasing a house in Dubai for living in it as the increase in the emirate’s house rents outpaced all global destinations in the first quarter of 2014.

According to global property consultancy Knight Frank’s latest Prime Global Rental Index, house rents in Dubai grew at 6 per cent in the three months ended March 2014, the most in the world, followed by Tokyo (5 per cent) and Geneva (4.1 per cent). “Dubai and Tokyo recorded the strongest rates of growth with prime rents rising by 6 and 5 per cent, respectively, in the first three months of the year,” it noted.

Prime residential rental growth in Dubai continues to outpace that of the traditional financial centres of London and Hong Kong, says Kate Everett-Allen of Knight Frank’s international residential research. “Some of the world’s top financial centres – Singapore, London and Hong Kong – are positioned at the bottom of the rankings with annual falls of -0.3, -2 and -6.3 per cent, respectively,” the report states.

The consultancy says that Dubai’s increasing prime residential rentals, which are outpacing wage inflation, are a major factor leading residents to consider buying a home in Dubai. “In Dubai, prime rents continue to outpace wage inflation. This is raising concerns about affordability and is leading domestic and expat buyers alike to consider purchasing a home,” the report maintains.

Year-on-year, however, Dubai is outpaced by Kenya’s Nairobi, where prime house rentals surged by 25.8 per cent in the 12-month period ended March 2014, compared with Dubai’s 16.4 per cent rise during the same period.

However, the Nairobi market seems to be cooling off, says Knight Frank, with rents in the latest quarter showing only a small increase. “There are signs the [Nairobi prime rental] market is cooling with growth of only 2.1 per cent recorded in the first three months of 2014,” Everett-Allen notes.

House prices and rents in Dubai have been surging for the past 24 months, with authorities taking steps to control the rally in order to avoid any risks of overheating. “The introduction of a mortgage cap and higher transfer fees at the end of 2013 has led some to defer this decision [of purchasing a home in Dubai],” Knight Frank says.

As Emirates 24|7 reported last week, after rising by the most in the world for a year, prices of Dubai’s prime residential property grew by just 1 per cent quarter-on-quarter in the first three months of 2014 as a result of active intervention by the authorities to weed out unnecessary speculation from the emirate’s property market.

Knight Frank had noted in its previous report that the “double whammy of higher transfer fees and the new mortgage caps are having their desired effect, although the latter has been especially effective in dampening buyer activity.”

It added that Dubai’s “residential prices will resume on an upward path in the second half of this year.” Read: Dubai house prices to rise again in second half of 2014: Knight Frank

The consultancy cited strong economic conditions, a well performing labour market and prospects of loosening credit standards for buyers to suggest that demand for prime residential property will see an uptick in the short-term.

According to the firm, “despite the significant price growth seen over the past couple of years, it is difficult to argue that Dubai’s prime residential property is expensive by international standards.”
 

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