Dubai's rental sector continues to suffer as the market performs poorly in the wake of excess property coming online, coupled with residents leaving the emirate. A recent report reveals that average rents for villas has dropped by 42% from the peak of Q3 2008 to Q2 2009.
In the same report, released by Dubai-based Landmark Advisory, average rents for apartments fell by 29% from their peak period of Q4 2008 to Q2 2009.
Year on year, rents for villa and apartment rents have declined by 19% and 12% respectively.
For those areas still finding interest in leasing property, the report argues that demand is being driven by relocations from the other emirates within the UAE such as Abu Dhabai, Sharjah and the Northern Emirates.
The report noted those relocating from Abu Dhabi are primarily focusing on property in Dubai Marina, Jumeirah Beach Residences, Palm Jumeirah and the Green Community whereas those relocating from Sharjah are seeking affordable accommodation in Mirdiff, International City and Al-Qusais.
During Q2 2009 average rents in Dubai declined 23% to Dhs129,900 while average villa rents fell 19% to Dhs220,350.
Falling prices, however, represent a double-edged sword for landlords. Not only do they suffer through declining rents, but with market conditions in the customer's favour, they can make more demands on the terms of the lease.
Shift in terms
Consequently, Dubai's market is experiencing a paradigmatic shift in the approach by landlords. Unlike the previous few years, which saw the burgeoning ex-pat population faced with stringent and inflexible measures requiring one cheque for a year's rent, the average in the second quarter of 2009 was three cheques, with some reports claiming instances of landlords accepting up to 12 cheques.
The report believes the mitigating factors are seen in the population exodus that has been seen in the emirate as those without jobs leave the country: 'While it is difficult to quantify, anecdotal evidence suggests that a significant number of expatriates have left the UAE in the first half of 2009.'
And, despite the influx of relocations from Sharjah and Abu Dhabi off-setting overall decline, the report is not optimistic.
'We expect more out-of-work- expatriates to leave the UAE by summer's end,' the report said but it stopped short of making any further predictions such is the lack of clarity over the future. 'Looking to 2010, actual rent levels will depend on multiple factors, including the real volume of unit deliveries and net demand growth.
'While relocation trends are currently propping up the leasing market, its long-run performance will be defined by Dubai's ability to achieve net job creation. This will depend on macroeconomic performance and government policies, both of which are impossible to predict.'
Though difficult to predict, Dubai has made some moves to shore up its economy. On August 12 the ruler of Dubai Sheikh Mohammed bin Rashid Al Maktoum appointed Abdulrahman al-Saleh, the Director General of Dubai's Department of Finance, as the Chairman of the Dubai Financial Support Fund.
The fund was established in late July as an independent legal entity to manage the proceeds of the Dubai Government's $20bn sovereign bond programme, and any future issues of the state.
Three board members were also announced, Mattar Mohammed al-Tayer, chairman of the Roads and Transport Authority (RTA), Majid Saif al-Ghurair, Chairman of Shuaa Capital, and Riad Mohammed Khalfan Belhoul, legal adviser to Sheikh Mohammed.
The board's duties include assessing the loan applications from government and government-related entities, as well as selecting strategic projects to be granted financial support.