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    October 1st 2019Real Estate News

    Residential rents in Dubai to stay lower in 2020

    Sector pricing to continue downward trend on supplies, competition and bullish economic sentiment.

    Residents in Dubai are expected to enjoy lower rents next year despite a pick-up in economic activity and preparation for Expo 2020 as more units will come online and increase competition in the market, experts say.

    Unlike a general perception that rents will go up ahead of Expo 2020, residents will be paying less rents due to a supply-and-demand correction, subdued population growth, bearish market sentiments and global or regional economic uncertainties, they said.

    Latest data released by ValuStrat indicates that average annual rents in Dubai dropped by 9.2 per cent in the first three quarters of 2019 compared to 8.4 per cent in 2018 and 9.1 per cent in 2017.

    Apartments across Dubai registered a 9.4 per cent year-on-year decline in rents, while villa rates dropped by 8.8 per cent so far this year. Average rents in Dubai fell approximately 27 per cent during the last three years and the similar downward trend is expected to continue in 2020.

    “The general decline in annual rents is expected to broadly continue for many areas, with more sharpened drops in areas with significant new supply pipelines,” Haider Tuaima, head of real estate research at ValuStrat, told Khaleej Times. “We have no reason to believe that rents would increase in 2020.”

    The report showed that average apartment rents in Dubai dropped from Dh74,373 in the first quarter of 2019 to Dh70,548 in the third. Villas followed a similar downward trend as average rates fell from Dh221,202 to Dh210,454. Residential occupancy in Dubai is estimated at 86 per cent.

    “The market condition is slow due to a supply and demand mismatch. Rents are likely to pick up momentum from the first quarter of 2020 onwards,” said Saad Maniar, senior partner at Crowe in DIFC.

    Elaborating, he said the residential rent market will remain under pressure next year due to a supply and demand correction. However Expo 2020, extraordinary infrastructure and recent changes in property laws and regulations will have a positive impact on economy in general and the real estate sector in particular.

    “No one should have a doubt that Expo 2020 and excellent infrastructure will attract more investors in Dubai,” Maniar said.

    Average annual rents for two-bedroom villas stood at Dh105,000; three-bedrooms were at Dh160,000 while four-bedrooms remained at Dh209,000. Moreover, average rents per annum for studio apartments were Dh48,000, while one-, two- and three bedroom apartments were at Dh67,000, Dh97,000 and Dh130,000, respectively, according to the report.

    John Stevens, managing director at Asteco Property Management, said rents’ downward trend is likely to continue in 2020. However, tenants who have been paying below-market rents, as they are protected by the rental cap, could expect marginal rental increases in line with the law.

    “Overall, Asteco expects rental rates to continue their downward trajectory in 2020, albeit at a lower rate, which means the majority of tenants should be paying less rent next year,” Stevens told Khaleej Times.

    He said that the lower rents are strongly linked to the negotiating skills of tenants and their willingness to move if the landlord is not flexible. “Many tend to stay put to avoid the cost/hassle of moving and therefore do not take advantage of declining rents,” he said.

    Stevens attributed the decline in rents to oversupply, subdued population growth and bearish market sentiment in addition to limited or negative business/employment growth and global or regional economic uncertainties.

    The ValuStrat report named Dubai Sports City, Discovery Gardens, Jumeirah Lake Towers, Dubai Marina and Dubai Production City as locations where rents dropped the most in the first nine months of 2019. For villas, the report mentioned Arabian Ranches, Jumeirah Village, Jumeirah Islands, Dubai Silicon Oasis and Jumeirah Golf Estates, where rents declined from 13.7 per cent to 7.1 per cent during the January-September period.

    All rights reserved to the initial publisher for Khaleej Times.

    Collected and published by propertyeportal.com editorial team. Get in touch with us at [email protected]