Dubai tenants negotiate hard to bring down house rents

Tenants remained budget-conscious, taking advantage of additional supply and competitive rates to relocate to new properties or negotiate existing contracts.

Apartment rents in Dubai dipped three per cent quarter-on-quarter (q-o-q) in Q1 2017 and eight per cent annually, according to real estate consultancy Asteco.

High-end properties were most affected with the Palm Jumeirah witnessing rent decreases of seven per cent q-on-q and 14 per cent annually. In DIFC, there was no movement for quarterly prices, however, annually the figure dropped by nine per cent.

Mid-market apartments followed suit, witnessing quarterly and annual declines of three per cent and 12 per cent in Business Bay and two per cent and four per cent in Jumeirah Lakes Towers (JLT).

Discovery Gardens was the only area to notch an increase in the affordable sector with an annual rise of three per cent.

"A combination of new supply and tenants taking advantage of competitive rates has resulted in landlords offering more flexible terms either by increasing the number of cheques or, in some instances, offering rent-free periods. This has been compounded by the addition of 3,600 apartments in Q1, which is expected to top 17,000 by the end of the year, thus putting further pressure on the rental market," said John Stevens, managing director, Asteco.

Tenants remained budget-conscious, taking advantage of additional supply and competitive rates to relocate to new properties or negotiate existing contracts.

In the villa rental market, the trend was similar to apartments with declines of three per cent q-on-q and eight per cent annually as tenants took advantage of increased availability of competitively priced properties.

Rents are expected to decline further as 4,000 villas are scheduled to be delivered by the end of the year, which are likely to be leased below prevailing rates to improve take-up.

Around 650 villas were handed over in Q1 2017, according to Asteco.

"Sales prices in many communities are fluctuating and are not expected to stabilise until rents bottom out, which is not expected to happen until later this year or early 2018," added Stevens.

Sales prices in communities with good infrastructure, amenities and limited future supply potential recorded marginal increases. Villa sales prices in The Meadows and The Springs, for example, were up eight per cent and five per cent respectively from Q1 2016.

"From a sales perspective, apartments witnessed declines across the board. However, it was the upper end of the market that felt the impact most acutely, with both Downtown Dubai and Dubai Marina seeing year-on-year decreases of seven per cent. The villa sales market fared better as some of the established communities with good transport links and within proximity to DMCC and Media City, and those with good amenities including shops and restaurants, witnessed increased demand resulting in price growth," said Stevens.

Asteco identified a one per cent q-on-q decline in apartment sales prices in the first three months of the year. Since Q1 2016, the market recorded a drop of three per cent in rates.

"We have, however, noted increased transaction activity in Q1 2017 compared to the same period last year," added Stevens.

- deepthi@khaleejtimes.com