New Dubai rental hotspot for budget-conscious residents

Even as rents begin to stabilise in the more affordable communities in Dubai and, therefore, in Sharjah, a new rental hotspot is emerging on the horizon for those with a keen eye on their annual rental budget.

The latest Northern Emirates market report from real estate consultancy Asteco highlights that demand for affordable housing continued to attract new arrivals principally from Dubai to Sharjah and Ajman in second quarter of 2014.

Ajman outperformed the market in the most recently concluded quarter, says Asteco, with rents surging by 7 per cent – more than the increase witnessed in Dubai or Sharjah. Nevertheless, the increase in rentals is on a smaller base of original rentals as the emirate is among the most affordable in the UAE due to its distance from Dubai and Abu Dhabi.

“Ajman is now taking over the mantle as the relocation destination for budget-conscious residents as landlords in Sharjah ask higher than average rental rates, particularly for brand new buildings in popular locations like Al Nahda, Corniche and Al Wahda. However, this eagerness to capitalise on market opportunity is not being matched by transaction volume, confirming that budget issues are still a key driver,” said John Stevens, Managing Director, Asteco.

Ajman provides significantly more affordable units with 2-bedroom apartments, for example, being leased from Dh30,000 to Dh45,000 per annum, in comparison with Sharjah, where rates for a similar unit achieve as much as Dh80,000 in a good quality building, the Asteco report maintains.

In contrast, 2-bedroom units in Dubai’s posh Palm Jumeirah island fetch up to Dh220,000 per annum according to Asteco’s Dubai leasing report for Q2. This makes Ajman units more than seven times cheaper to rent than the most upmarket Dubai properties.

Another indicator of Ajman’s affordability vis-à-vis Dubai and Sharjah is the fact that its most expensive 3-bedroom units rent for Dh55,000 per annum, compared with Dh95,000 for similar units in Sharjah, and up to Dh320,000 in Dubai.

Relocation to Ajman may also be gaining traction as some Sharjah landlords have recently begun asking for higher than average rentals which may be unacceptable to tenants.

“A return of confidence to the market has led landlords in Sharjah to seek higher than average rental rates, especially for brand new apartment buildings in Al Nahda, Corniche & Al Wahda Street. However, only a few transactions completed at above market rates, which indicates that Sharjah remains an area for budget sensitive residents unwilling to pay high rates,” says Asteco.

The report also highlighted a slowdown in residential rental growth rates in the Northern Emirates as the supply and demand dynamic underwent a geographic shift.

Sharjah recorded 3 per cent quarter-on-quarter growth for apartment rentals with year-on-year growth dropping to 31 per cent from 38 per cent in Q1, whilst annual rates in the other Northern Emirates of Fujairah, Umm Al Quwain and Ras Al Khaimah remained stable with nominal increases of 2 and 1 per cent, respectively.

Bucking the trend, Ajman’s residential real estate sector received a fillip, registering a 7 per cent increase in Q2 2014 and driven by the emirate’s ultra-affordability, with two-bedroom apartments available for between Dh30,000 to Dh45,000 per annum in comparison to up to Dh80,000 in Sharjah.

“Sharjah in particular has benefited in recent months due to aggressive rental rate increases in neighbouring Dubai, but this quarter saw a degree of stabilisation in Dubai’s more affordable communities, which led to a reduction in the number of residents choosing to relocate,” Stevens added.

The overall positive market sentiment at the start of 2014 has also seen the reprisal of a number of stalled residential projects and launch of several new projects in the Northern Emirates, which Asteco expects to boost current stock in the next few years.

RAK Properties recently launched the 141-villa Bermuda Villas project in Mina Al Arab, Ras Al Khaimah and Emaar also unveiled its Sharjah-Dubai border development. Al Mamzar Lake, which features waterfront homes, serviced residences, retail amenities, fountains and water-themed leisure attractions.

“This surge in the development pipeline in the Northern Emirates is a positive reflection on the future prospects of the UAE real estate sector as a whole. We are seeing investor confidence return as the country pushes ahead with the next wave of infrastructure projects that will create opportunities to build new communities supported by the requisite access, facilities and services that long term residents would expect,” noted Stevens.

Prospective tenants looking for prime accommodation in Sharjah or further north in Ras Al Khaimah can expect to pay up to Dh80,000 for a ‘high-end’ two-bedroom in Sharjah and up to Dh75,000 for a similar unit in a master-planned community in Ras Al Khaimah.

Despite overall stabilisation, rental prices in certain Sharjah neighbourhoods recorded above average growth in Q2 2014 led by a 7 per cent rise in Al Khan where one- and two-bedroom units currently command up to Dh45,000 and Dh55,000m respectively.

Al Majaz and Al Nahda saw increases of 6 and 5 per cent, respectively, taking one- and two-bedroom prices to Dh45,00/Dh55,000 and Dh45,000/Dh60,000.

Demand for office space in Q2 2014 remained flat with Sharjah’s commercial sector experiencing an extended period of stagnation and no movement in rental rates quarter on quarter.

Follow Emirates 24|7 on Google News.