Leasing activity in Dubai’s residential market tailed off towards the end of the first quarter as landlords proved more willing to negotiate on rents to keep existing tenants in place, according to a report from Asteco Property Consultants.
Although apartment rent declines were “limited" over the quarter, with affordable areas remaining flat and mid-market communities reporting declines of just 2 per cent, certain submarkets performed considerably worse than others.
At Jumeirah Lakes Towers, for instance, rents declined by 6 per cent quarter-on-quarter and 12 per cent year-on-year by the end of March.
Typical rents in the area now stand at between Dh65,000 and Dh90,000 for a one-bed apartment and Dh75,000 to Dh125,000 for a two-bed.
“While the community is attractive overall, the quality of most residential towers are below the tenant’s expectations considering the high rental levels," the report said.
Asteco said that luxury apartments have proven hardest to let and remain vacant for longest, despite significant year-on-year rental declines.
Rents for Palm Jumeirah and Dubai Marina apartments are both 8 per cent lower.
Villa rents, meanwhile, have stabilised as the pipeline of recent completions has slowed.
“People are being more budget-conscious," said Julia Knibbs, the UAE associate director of research and consultancy at Asteco.
“They may be more worried about their jobs, so are looking to be more cautious in terms of their rents.
“Either they renew at a lower rate, look for something smaller or in a slightly less fancy area.
“Landlords are realising how important it is to retain tenants rather than risk having a vacant unit and then later having to reduce the rent anyway."
Meanwhile, sale prices for apartments remain 5 per cent lower year-on-year, with luxury units experiencing the steepest declines – Jumeirah Beach Residences properties are 18 per cent cheaper than in the first quarter of last year, while Palm Jumeirah homes have fallen in value by 11 per cent and Dubai Marina by 10 per cent.
However, the pace of price declines has slowed and in many areas was flat during the quarter.
Ms Knibbs said that sale prices seem to have bottomed out.
“There might still be some small declines going forward, but we have noticed that lots of bulk investors and cash buyers are in the market looking for opportunities at the moment.
“They could find them, because sellers are willing to negotiate.
“We’ve had a couple of big transactions concluding at really good rates for buyers.
“It’s an indication that people that know about the market and are not risk-averse are seeing an opportunity. Low prices have unlocked demand."
This month, the Dubai portal propertyfinder.ae stated that buyer interest via its site was at a two-year high, having increased by 28 per cent since January.
The ratio of users searching its site for properties to buy, as opposed to rent, increased to 32 per cent earlier this month – up from 25 per cent in January.
The research firm Valustrat has also said there has been no significant change in property values in 26 areas monitored by the firm for the past seven months, and JLL’s head of research, Craig Plumb, has indicated that he expects sale prices to return to growth by the end of this year.
Ms Knibb said: “I don’t think that rates are going to increase, but there might be a pickup in transaction volumes over the year, which will eventually lead to growth."
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