Dubai: While housing rents aren’t skyrocketing, tenants in Dubai are now moving farther afield in search of good-value-for-money accommodations.
Property analysts said they are seeing an “exodus” of Dubai residents into more budget-friendly neighbourhoods, with communities like Silicon Oasis generating a great deal of interest. The trend, in turn, is putting downward pressure on rents within the city centre.
Rents in most parts of Dubai have been on a decline since 2014 as the strong dollar softened investment demand and low oil prices weighed on job creation and company earnings. In 2016, residential flats recorded rental price falls of 6 per cent to 8 per cent, when compared to a year earlier.
Back in 2015, studio apartments were being rented out for Dh62,000 on average, but this time around, the rents have dropped to Dh57,000. At the same time, the average rent for two-bedroom flats fell 8 per cent to Dh145,000, while three-bed and four-bed flats registered rental declines of 6 per cent and 8 per cent, respectively.
“An exodus to the suburbs had an effect on rents in the main parts of the emirate,” real estate portal Bayut.com, which provided the figures, said.
Analysts are split on whether or not the trend will continue this year, with some predicting a "price house floor" or "market trough."
For Jesse Downs, managing director of Phidar Advisory, tenants can expect steady rent declines through 2017, thanks to newly completed units entering the market amid weak demand growth. She said Dubai residents are indeed currently relocating, but it’s not only because they are looking for lower rents.
“It’s often driven by value. Tenants are relocating to areas with lower rents or to places with similar rents that offer better value,” Downs explained.
“Value is driven by the quality of the unit – the quality of the layout, fit-out, but also maintenance and management of the building. Plus, the focus is increasingly on the amenities provided in the building and/or community.”
The realty market, however, tends to gloss over the real value of a property and focuses too much on price and location. “There isn’t enough price differentiation within specific communities and areas. This should change in the coming years,” added Downs.
Asma Al Dakkak, research manager at JLL Middle East and North Africa, said there is a high demand for affordable or middle-income housing in Dubai. Developers had already taken notice of the trend, and as a result, 22 per cent of property projects launched in 2015 and 18 per cent of those unveiled a year later cater to the affordable segment of the market.
“Therefore, we see the exodus of some tenants into affordable areas, such as Dubai Silicon Oasis, for example and increased interest in developments such as Town Square by Nshama due to the attractive rates they offer,” said Al Dakkak.
“The additional supply in the market has created competition, which could help support the decline in rental rates across the city.”
Al Dakkak, however, noted that while the current economic conditions may continue this year, the medium-term outlook for Dubai’s real estate is more positive.
“In the residential segment, prices and rentals have been declining since mid-2014, and we believe the market is now poised closer to its cyclical trough. The combination of continued economic slowdown in 2017 and the additional supply entering the market may translate to a delay before prices start picking up again.”
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