Residential rents soar as demand outstrips supply

But the good news is prices are likely to stabilise in the medium term.

Rents for one, two and three-bedroom apartments in Dubai rose by an average of 38 per cent over the last 12 months according to Asteco. Two bedroom apartments saw the highest increases, with a 44 per cent hike in the year from October 2004. Rents for one and two-bedroom properties rose by an average of 35 per cent.

Residential rents in Dubai went up the most on Sheikh Zayed Road, and in the Bur Dubai and The Greens, New Dubai areas. The average rent for a one-bedroom pad on Sheikh Zayed Road shot up from AED58,000 last year to AED72,000 today, while one bedroom rents in The Greens went up by an average of AED20,000.

"There's much more demand than supply in Dubai at the moment, but this won't last indefinitely as more towers and mega projects come on-stream over the next two years," said John Allen, Director Consultation, Research and Valuations, Asteco.

"We expect current prices to cool down as supply for both residential and commercial real estate begins to meet demand over the medium term."

"Peaks and corrections in the market are to be expected, though it is unlikely that prices will drop as low as levels of several years ago. While some landlords have increased rents in line with currents trends, others have kept them relatively stable to retain the loyalty of long-term tenants."

The cost of office space in Dubai is also soaring, with rents up by an average of 29 per cent since October 2004. Average rents for new office space in Dubai are now at AED135 per square foot on Sheikh Zayed Road, AED100 in Bur Dubai and AED90 in Deira, an increase of 23 per cent, 33 per cent and 29 per cent respectively compared to last year's prices.

Some of the properties and major developments due for completion in 2007 include The Garhoud Views (Garhoud), Park Place (Sheikh Zayed Road) and the World Trade Centre Residence (Sheikh Zayed Road). All the properties will be leased by Asteco.

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, property marketing; feasibility studies and valuations; and research and investment.