Rents in new Dubai to offer best deals

Dubai Marina (FILE)

Published Sunday, March 06, 2011

By Shuchita Kapur

More residential units being delivered in Abu Dhabi will only marginally affect houses in new Dubai communities, such as the Marina and Emirates Living

These will compete against each for rents, according to industry experts.

“The impact of new properties coming on to the market in Abu Dhabi on Dubai in 2011 is expected to be minimal. The reason for that is that while approximately 21,000 units are due for delivery in 2011 in Abu Dhabi, there are likely to be delays in handover, as witnessed in 2010, and maybe only half that figure will be delivered eventually. We do expect though that there will be an impact on the Marina, in part due to Abu Dhabi and also because there are 12,000 units yet to be delivered where buildings are currently under construction.

“People living there may prefer to move to Abu Dhabi and/or other projects such as JLT which will be less congested. Thus, we expect to see rents possibly falling in Marina at a later date say in 2012 /13,” Charles Neil, CEO of Landmark Properties told Emirates 24|7.

Experts at Better Homes also expect a marginal impact. “While this will allow for more breathing space within the Abu Dhabi property market, I don’t believe it will affect Dubai property prices, nor would it drive people working in Abu Dhabi/living in Dubai to move back. However, properties in the Marina and Emirates Living Communities may find themselves competing for rental rates – it’s too soon to tell,” said Rajkumar Vaswani, Residential Leasing Consultant, Barsha Office of Better Homes.

The main reason behind this is the lack of good residential units in Abu Dhabi and the high demand that the city is facing. The market has appetite to absorb these units. “Demand for the new units will be quite high from Abu Dhabi residents as well, as the standard of accommodation in Abu Dhabi, particularly on island is quite poor, the buildings have little in the way of amenities and parking is a major problem. Thus, demand from Abu Dhabi residents willing to pay higher rents than their Dubai counterparts will probably absorb the larger part of these new units and certainly in 2011 the impact on Dubai will be limited and the impact will only be gradually felt from 2012 onwards,” explained the Landmark Properties expert.

Moreover, the attractive rents in new Dubai and the good lifestyle will remain lucrative factors for tenants and they may not consider moving out.

“I anticipate Abu Dhabi prices to remain higher than those in Dubai for the time being, and do not expect to see bargains like a studio for Dh28,000 available in the Abu Dhabi property market in the immediate future.

“The majority of tenants, who work in Abu Dhabi still choosing to live in Dubai, do so because of the mature communities within which they escape from their stressful work and commute environments.

“As for the Abu Dhabi/Dubai/Abu Dhabi commute, if the pay-off is a superior quality apartment at a cheaper price, then most will choose to commute. Although, there has been an undersupply of property in Abu Dhabi, we expect to see far greater choice throughout the capital’s property market this year.

“More stock will drive prices to be more competitive for tenants; however, this is unlikely to compete with Dubai’s property prices for some time. In addition, those who still choose to live in Dubai and commute to Abu Dhabi to work are opting for the ‘lifestyle’ offered within their respective communities. However, for the roughly 20 per cent who choose to move back to the capital, rental rates will still not be able to compete with those available in the mature communities of Discovery Gardens and JLT where you can find a one-bedroom apt for Dh35,000–50,000 per annum,” explained Vaswani,.

Commenting on the reversal trend, Neil added: “Even when all the planned units are eventually delivered, we don't expect a major reversal of people moving away from Dubai back to Abu Dhabi as with the rapid growth of the Abu Dhabi economy there is unlikely to be an oversupply of quality accommodation, and equilibrium will only be reached in about 2014 because there are also other factors to be taken in to account such as better quality of schooling in Dubai, and often one of the spouses will have a job in Dubai.”