Dubai rental prices decrease as some sale prices stabilise

A report on the Dubai property market in the second quarter of the year has concluded that some areas may have already hit the bottom of the pricing cycle.

Properties on the Palm Jumeirah, which suffered some of the largest falls in price during Q4 2008 and Q1 2009, may be showing signs of stabilisation, driven by the slowdown in 'distressed' units coming onto the market, Dubai-based property services group Asteco has said.

Villa prices on the development rose by an average of 20%, compared to Q1 2009, while apartment prices rose by 7%. This is against falls of between 40% and 50% from mid-2008 market highs.

Similarly, prices in developments such as Dubai Marina, the Downtown Burj Dubai and communities such as the Meadows, Emirates Hills and the Springs, all showed continued signs of stabilisation in sale prices - reflecting similar findings by a number of other reports.

Across the city as a whole, however, average prices continued to fall during Q2. Prices for apartments fell by 15% (to approximately Dhs900 per square foot), compared to Q1, while villa prices fell by an average of 13% (to approximately Dhs980 per square foot), according to Asteco.

Rental decreases

Rents in Dubai continued to fall in most areas, the report found. Lease prices for apartments fell by an average of between 16% and 26%, compared to similar properties in Q1.

Rental prices for studios fell the most on average, at 26%. Leases went down from Dhs61,500 in Q1 2009, to Dhs41,500 in Q2. Prices for one bedroom flats showed the least decline, going down 16% in the three months from Dhs93,000 to Dhs78,000.

Average rents for two-bed apartments fell by almost 19%, from Dhs132,000 to Dhs107,000. For three bedroom units, the fall was approximately 19%, from Dhs185,000 to Dhs149,500 annually.

Villa rental prices fell to between Dhs233,750 for a four bedroom house, to Dhs277,000 annually for a five bedroom unit.

For properties on the Palm Jumeirah, villa lease prices fell by an average of 25%, while apartment rental prices fell by 12%.

Commercial prices drop

The average asking price for office space fell by close to a quarter (approximately 24%) over Q2 compared to Q1, with the biggest falls seen in some 'outlying' areas such as Dubai Sports City, which saw falls of 60%.

Rental prices also dropped, as landlords saw an increase in supply coming onto the market combined with a slow down in demand. Average annual rates fell by 20%, although the report noted that with Dubai Metro due to come online in September, areas serviced by the route - such as Sheikh Zayed Road properties - would see increased stability.