Dubai rental price 'uplift' fuelled by landlords

During Q2 of this year, the average price for apartment rents fell by 23% to Dhs129,900, while average leases for villas fell 19% to Dhs220,350.

This brings villa leases down 31% from their peak in Q3 2008, and apartment rents down 29% from their peak in Q4 2008.

'[We are] observing an unexpected, albeit marginal, upsurge in rents across Dubai,' says the report.

'Landlords are delisting or foregoing listing their properties, either due to dissatisfaction with current rent levels, or because they are on vacation during the summer. Either way the result is a marginal average increase in rents at a time when the fundamentals should be dictating the opposite trend.'

The report is scathing about what it sees as an abortive attempt to stop rental rates reaching a realistic floor.

'Assuming that landlords are exiting the market due to lower rents, this behaviour will prevent Dubai's leasing market from reaching a rent floor. The momentary respite in the rent correction process, caused by supply distortion, is only temporary and will reverse as soon as those properties come back onto the market. Real rents will be determined by what Dubai residents are willing to pay.'

Rental trends

Although the average rents for flats fell more steeply than those for villas in Q2, this was the opposite of the trend seen in Q1 2009.

Compared to the same period in 2008, rental rates for villas have fallen by 19%, while those for apartments have fallen by 12% - although this was before each unit type's peak lease rate.

The rental market in Dubai continues to be fuelled to a certain extent by relocations from other emirates. Tenants from Abu Dhabi are filling leases in the Marina, Jumeirah Beach Residences, Palm Jumeirah, and Emirates Living and Green Community villas. Mid income tenants who are commuting to the capital are looking at properties in Jumeirah Lake Towers and Discovery Gardens.

Tenants relocating from Sharjah and the Northern Emirates are choosing locations in Mirdif, International City and Al Ghusais according to the report.

Demand for unit types

The number of leasing transactions for villas saw an increase of 25% over Q2, with three and four bed properties proving the most popular, possibly in response to the continuing market trend for tenants to 'upgrade' their homes as prices fall. Two and five bedroom units saw the largest rental asking price declines, of 28% and 27% respectively. Prices for three and four bed homes fell by 18% and 11% in Q2.

Emirates Living, Mirdif and Jumeirah and Umm Suqueim remained the most popular locations.

Demand for apartments grew by 20% in Q2, with one and two bed units proving the most popular, although the average rent for two bed properties fell by 44% as tenants moved to more affordable areas.

The most popular areas for apartments were Dubai Marina, which accounted for 26% of new leases, down from 37% in Q1, Jumeirah Lake Towers, at 19% up from 14%, and International City, which grew from 2% in Q1 to 19% in Q2.