Tenants drive rents in Dubai

Signifying the right time for tenants and buyers to rent or buy the most attractive properties at prices dictated by them.

Apartment and villa rents have reported a sharp decline of 22 and 34% respectively in Q1 2009 in comparison to the prices in the fourth quarter of 2008, according to the Dubai report issued today by Asteco, the UAE's largest property services company.

The new trend is now leading many landlords to review their rent structures and offer attractive incentives and payment options to suit the demands of the tenants.

Lower rents are now attracting tenants back to Dubai and home buyers are now able to snap up stunning property bargains in some of the most sought-after neighbourhoods in the emirate, the report added.

Commenting on the trend, Andrew Chambers, Asteco's Managing Director, said:

"This is a positive development for house-hunters to either take up an attractive property on rent or buy as Dubai turns into a buyer-driven market. We are witnessing a high number of transaction activities, especially for finished units, as investors take advantage of attractive investment opportunities available in the city."

In the first quarter of 2009, average rents for studios, one-bedroom, two-bedroom and three-bedroom apartments across Dubai slumped to Dhs61,500, Dhs93,000, Dhs132,000 and Dhs185,000 respectively.

Average rents for villas were Dhs160,000 for two-bedrooms, Dhs215,000 for three-bedrooms, Dhs264,000 for four bedrooms and Dhs366,000 for five bedrooms.

The biggest apartment rental drops were witnessed in Palm Jumeirah, Al Barsha, Bur Dubai and Discovery Gardens, where average rents hovered around 30% lower than the rents in Q4 2008.

Villa rents also dipped significantly, with the largest drops reported in Springs and Jumeirah Island at 41%.

Asteco's Dubai Report showed that many tenants were moving from larger units to smaller ones, due to a reduction in household incomes and adoption of a more cautious approach towards household expenditure.

In stark contrast, those not affected by the economic downturn have seized the opportunity to upgrade their homes to larger units or relocate from old buildings to newer ones.

Additionally, people who left Dubai earlier to take up reasonable options in the Northern Emirates are also beginning to return.

Tenants are also taking advantage of the attractive incentives provided by landlords, such as payment options of up to 12 cheques, grace periods, deferred payments, and one month's free stay.

The decline has come as a big relief to tenants who used to spend more than half of their salaries on rent alone.

Transaction activity for units in established community-style developments in New Dubai has perked up again, following disappointing sales in the Q4 2008 period.

The area recently saw the completion of infrastructure projects and convenience of retail and leisure facilities nearby. Demand is high for properties in Dubai Marina, Jumeirah Lake Towers, Discovery Gardens and Emirates Living. Due to the lack of mortgage availability, cash buyers currently are highly sought after.

Apartments in Jumeirah Beach Residence and Dubai Sports City reported the highest average decline in sales prices of 53% less than the prices in Q4 2008.

Palm Jumeirah and Dubai Marina followed closely behind at 46% and 44% respectively.

The drop in sales prices is seeing an increase in transaction activity as buyers take advantage of lower-priced units.

Villa developments experienced a greater decrease in sales prices as compared with apartments, with prices falling an average 43% across the emirate. Most affected were units in Jumeirah Island and Springs, which reported a drop of 65% and 61% respectively.

Arabian Ranches and Meadows also saw a reduction of 55% in property prices during the first quarter.

On the other hand, Asteco's Commercial Report for Dubai showed that office spaces that have been completed or nearing completion fetched higher premiums than off-plan projects.

However, office sales prices for finished units as well as off-plan units have been subject to a decrease, with several companies opting for smaller office units. Instead of purchasing office space, some companies have opted for leasing to help with cash flow while expansion plans and start-ups have been put on hold until regional and global markets begin to stabilise.

Downtown Jebel Ali and Jumeirah Village saw huge declines in average office sales prices at 55% and 50% respectively while previously hot business locations Tecom, Deira and Bur Dubai saw office rents decreasing sharply by 43%, 41% and 40% respectively, signifying a preference for better located office spaces in DIFC and DHCC.

Compiled and updated quarterly since 2006, Asteco's research reports include the survey and compilation of residential and commercial rental analysis for each emirate of the UAE.

Founded in Dubai in 1985, Asteco is the UAE's largest property services company. Its services include retail, commercial and residential sales and leasing; strategic consultancy; property management and marketing; feasibility studies and valuations; and research and investment.