Samir Salya on The Continuing Rental Declines in Dubai

Due to the current state of the rental market, there is no better time than now to be renting in Dubai. With factors such as increased competition, oversupply and poor market performance in general, rental prices are seeing continued declines. With situations unlikely to change, we can expect Dubai’s renter-friendly market to continue for the foreseeable future.

Rates continue to fall

According to Propertyfinder Group, as of January 2018, apartment rental prices continued to fall. Compared to the same period last year, prices are down 7.43%. If the current market state is put into comparison with the market’s peak in 2014, the results are even more worrisome. Apartment rental rates declined by between 16 and 20% from 2014 to 2018, depending on the size of the property.

Speaking to Gulf News, Propertyfinder’sChief Commercial Officer, Lukman Hajje states: “The high rate of handovers is putting downward pressure on rents, as supply, for now, is outpacing demand.”

“We expect that apartment rents in Dubai will continue to soften in 2018. Low to mid-single-digit percentage declines are expected across most communities, continuing a trend we’ve seen now for more than three years.”

Lowering prices for luxury?

The influx of newly completed luxury properties is also providing unfortunate consequences for the market and their investors. Due to the large number of developments in the region, the market is witnessing the effects of oversupply. As there are more to choose from, renters are being given more choice than ever. This is resulting in more competition, driving down the prices of luxury properties as they try to appeal to customers in the current climate.

According to Craig Plum, Head of Research at JLL Middle East and North Africa (Mena), luxury property prices need to fall in order to boost their chances of a sale.

Speaking to Gulf News, he notes: “While sale prices are expected to stabilise in Dubai residential market in 2018, rental levels are likely to decline further. This is partially due to the normal time lag between changes in the sale and rental sectors of the market, and partly due to the aggressive marketing of new launches that are targeting those that currently rent their accommodation.”

According to research by the Dubai Land Department (DLD), more homes are flooding the market. In 2017, developers registered 150 projects and only turned over 90 projects to the tenants. The affordable housing sector is seeing the most success, with the luxury market suffering as a result. This means landlords in surrounding areas are forced to bring down their rates to compete for tenants.

Looking to the future

With sale prices continuing to decline, speculative investors are forced to shift strategy and become landlords. This is only adding to the rental pool, and further driving down rents. As Plumb continues: “With more apartments getting built, this renter-friendly climate isn’t likely to change anytime soon.”

About Samir Salya

Samir Salya is the Chairman of Reign Holdings and is involved in UK and UAE real estate and construction. Samir holds over 20 years’ experience in executive management, business expansion, performance improvement, sales and marketing.