Dubai tenants: Expect a 5% hike on rent by year-end

Tenants in Dubai can expect to pay another 5 per cent more on their rents from the current rate.

This is in addition to a 15 per cent hike already witnessed over last year, according to an expert with a leading real estate brokerage company.

“Real estate in Dubai has been the center of attraction for investors, end users and home owners due to the consistent stability, which led to price increase of approximately 15 per cent in property rent  rates across all areas in the city.

We expect to see an additional 5 per cent increase by the end of the year,” Tareq Gouda, Team Leader, City Tower Office, Better Homes told Emirates 24|7.

Tenants have seen rent hike mostly in areas which are good quality and in demand.

[Click here to read what part of their income Dubai residents spend on rent]

Popular residential areas like Emirates Living, Greens, Green community and Dubai Marina have seen their rates go up. 

According to Asteco, there are a lower number of listings for certain unit types in established locations such as Downtown Dubai and Green Community with limited or no stock impending, which has resulted in higher asking rents.

“We believe this to be a sign of quality developments slowly reaching full occupancy, especially for dwellings which are low in numbers,” said its Q1 report.

Click here for the rents in popular Dubai communities 

“I moved to The Springs two years back and I easily got a three-bedroom for Dh110,000.

However, things have changed since then. My friend is looking for a similar place in the area and I was shocked when she told me that the asking rate these days starts at Dh120,000 and goes up to Dh150,000.

Moreover, the real estate agents tell her that the landlords are in no mood to negotiate,” said Nandita Chandana, an Indian resident in Dubai.

According to Charles Neil, Chief Executive Officer at Landmark Properties, residents in the city already spend 30 per cent of their income on rent.

Going by the recent hikes seen and what is expected by the year-end, rents will likely add to the burden for those living in the city.

However, lower quality communities like Discovery Gardens and International City have not seen any increase.

“Discovery Gardens experienced further declines due to the large amount of supply, low rental rates and high service charges,” stated the Asteco report. 

Rents in popular Dubai communities

Source: Better Homes

Apartment Rental Rates  

Villa Rental Rates

Source: Asteco

Dubai rents on the rise in select areas

Rents have started to increase in selective areas of Dubai after the pace of rental income slowed down significantly in 2011, but will continue to fall in fringe communities, according to a new report.

“The pace of decline in Dubai rents slowed down significantly in 2011 and is starting to shift gradually into selective increases in areas of higher quality and demand,” Global Investment House (GIH) said in a new GCC real estate sector report released on Sunday.

“We expect improvements in rental rates to be capped in the short term by new supply and declining rents in the outskirts of the city.”

Asteco, a real estate consultancy, in its first quarter 2012 report, mentioned that overall rental rates for apartments and villas rose by one per cent on average. Downtown Dubai rents rose five per cent, followed by Jumeirah Beach Residence (JBR) at four per cent and Jumeirah Lakes Towers (JLT) at three per cent. Rents in Meadows and Green community climbed by three per cent, respectively, while Arabian Ranches reported a two per cent jump.

In Dubai, GIH estimates the market is currently 20 per cent oversupplied that means 67,000 units are currently vacant.

“We expect this figure to increase as an additional 20,000 units are scheduled to enter the market in 2012, representing a six per cent increase on the current stock,” the report said.

Real Estate Regulatory Agency CEO Marwan bin Ghalitha has reportedly said 16,000 new units are likely to be released into the market this year.

Residential property prices, however, are bottoming out this year, but a noticeable recovery remains offsite in the near term.

“Prices are entering a stagnant phase of stabilisation with selective price increases; a pattern already materialising in well-established areas and for selective properties,” GIH said. Dubai villa and apartment segments have seen minor price increases in the first quarter after stabilising in in the last two quarter of 2011.

Property sales in Dubai soared 54 per cent as value rose 32 per cent in the first quarter of 2012 compared to same period last year, Dubai Land Department data has revealed. A total of 654 land sales, comprising apartments, villas and townhouses, were registered compared to 426 year-on-year. In value terms, a 32 per cent increase to Dh5.24bn was registered against Dh3.96bn in Q1 2011.

Knight Frank said last month that real estate in Dubai had not only stabilised, but prices went up 2.3 per cent on average in the last quarter of 2011.

Asteco also said property prices had stablised in Dubai with certain villa communities such as Palm Jumeirah, Arabian Ranches and the Springs already witnessing price hikes of up to nine per cent.

Abu Dhabi under pressure

GIH believes Abu Dhabi will remain pressured by the growing vacancy rates and incessant supply.

“In Abu Dhabi prices are still declining as new supply enters the market,” it said.

Villa prices declined seven per cent between first quarter 2011 and first quarter 2012, while apartment prices fell eight per cent during the same period. Quarter-on-quarter prices dropped five per cent.

“We expect further declines to materialise for at least the coming four quarters.”

In Abu Dhabi, vacancy rates are estimated at 15 per cent of fourth quarter 2011 stock of 195,000 units.

A fresh supply of 25,000 units is scheduled to enter the market this year, which has already impacted property prices in the first quarter 2012.

“We expect Abu Dhabi to be negatively affected by growing supply through to first quarter 2013 despite the current rationalisation in property delivery.”

Earlier this month, CB Richard Ellis, a global real estate consultancy, said rents in the capital had declined by 16 to 30 per cent in 2011 and are expected to continue their fall this year with 23,000 new units likely to enter market.

Rents are dropping on new supply and rental yields, currently at 7.2 per cent, are being compressed converging with Dubai yields, which GIH estimates at 6.6 per cent. 

JBR rents rise more than 20%

Despite the peak hour traffic jams in Jumeirah Beach Residence (JBR), residential rents in the master community have not plunged.

In fact, they are on the incline with average lease rates for two- and three-bedroom apartments having shot up by more than 20 per cent in the first quarter compared to fourth quarter 2011.

According to data from Dubai-based Harbor Real Estate, two-bedroom apartments were being leased for Dh100,000 to Dh120,000 per annum in the first quarter compared to Dh80,000 to Dh110,000 in September 2011.

Three-bedroom units are available in the range of Dh130,000 to Dh150,000 pa (Dh105,000 to Dh150,000), while one-bed apartments were rented for Dh75,000 to Dh90,000 (Dh65,000 to Dh80,000).

Information provided by PropSquare Real Estate reveals rents for two-bed units to be in the Dh100,000 to Dh120,000 pa range as against Dh80,000 to Dh90,000 pa in Q4, 2011, while rates for three-beds ranged between Dh135,000 and Dh145,000 pa (Dh110,000 to Dh120,000 pa).

Rents for one-bed units stood at Dh70,000 to Dh80,000 pa compared to Dh60,000 to Dh70,000 pa.

According to Asteco’s first quarter report, rents in JBR rose four per cent quarter-on-quarter with one, two and three beds available for Dh70,000, Dh90,000 and Dh115,000 pa, respectively.

JBR is among the prime freehold localities in Dubai. It faces 1.7 kilometres of beach that features luxury hotels, retail outlets and  restaurants and houses 36 residential towers.

Global Investment House (GIH), in a new GCC real estate sector report, said rents have started to increase in selective areas of Dubai after the pace of rental income slowed down significantly in 2011.

“The pace of decline in Dubai rents slowed down significantly in 2011 and is starting to shift gradually into selective increases in areas of higher quality and demand,” GIH said.

In Dubai, GIH estimates the market is currently 20 per cent oversupplied that means 67,000 units are currently vacant.

Follow Emirates 24|7 on Google News.