Dubai’s residential market saw modest declines in sales and rental rates, but enough to sustain a tenant-led market. The market conditions, however, may favour a certain segment of tenants than others.
“This is driving the progression of a tenant-led market and ultimately handing bargaining power to new tenants,” according to CBRE’s Q2 2017 Dubai MarketView. “However, tenants on existing leases are generally not finding the same level of flexibility from landlords, although rental increases are becoming less prevalent.”
Apartment rents declined by 2 per cent in the second quarter compared with the previous one, according to various reports. The Greens saw the largest decline among apartments at 5 per cent, according to Chestertons. Annually, Asteco reported a 7 per cent drop in apartment rents.
Rents are expected to remain under pressure throughout the year as new supply enters the market. Asteco forecasts total residential rental supply to reach 17,700 units this year, compared with 8,750 last year. Asteco said many of these units will be offered on discounted rates to encourage take-up.
Although villa rents also fell by 2 per cent, Chestertons noted that the segment witnessed the highest transactional values. Chestertons also reported higher-than-average villa rental declines in Victory Heights (8 per cent), The Lakes (6 per cent) and Al Furjan (4 per cent).
Palm Jumeirah and Springs posted a 4 per cent drop, according to Asteco.
Residential transactions in the second quarter declined by 23 per cent from the previous quarter, according to Chestertons, “seemingly impacted negatively by the onset of summer”.
However, certain types of property were insulted from the downtrend. “Smaller units in their respective sub-markets were more resilient to the decline, as studios and one-bedroom apartments, together with two- and three-bedroom villas, witnessed the lowest drops,” according to Chestertons.
Apartment sales were upbeat in certain areas and sluggish in others. Chestertons reported a 13 per cent quarterly increase in sales prices in Dubai Silicon Oasis and 11 per cent in Jumeirah Village Triangle, “buoyed mainly by sales of smaller units”.
However, new stock negatively brought down sales prices in Business Bay and Dubailand by 12 per cent and 10 per cent respectively.
“Downtown Dubai recorded a 7 per cent decline, due in part to the release of a number of branded residences,” Chestertons reported.
Asteco reported a 7 per cent decline in apartment sales prices International City and Dubai Marina.
Chestertons painted a rosier picture in villa sales with a 3 per cent quarterly increase in prices, with Palm Jumeirah up 10 per cent. Asteco, however, reported a 2 per cent quarterly drop in areas it monitors.