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Why UAE tenants have reason to cheer

dubai - Apartment and villa rents have continued to decline across the country

The decline in oil prices and the resultant drop in government and consumer spend continued to weigh on villa and apartment sales and rents across the country in Q2 2018.

Despite a lower number of handovers than anticipated, a significant volume of new supply was delivered in Dubai in Q2 2018, contributing to a quarterly drop in apartment and villa rents of 3 per cent and 2 per cent, with annual declines of 12 per cent and 10 per cent respectively, the consultancy Asteco said in a market report.

Cautious investor sentiment has also impacted residential sales prices. Asteco estimates that villa and apartment sales prices in Dubai declined by 4 per cent over the quarter, with an annual drop of 11 per cent. The decline in apartment sales was most prominent in DIFC, Discovery Gardens and Dubai Sports City that registered a 6 per cent decline since Q1 2018. Meanwhile, the highest quarterly drops in villa sales prices were observed in Jumeirah Park (8 per cent), Arabian Ranches (5 per cent) and The Springs (5 per cent), said Asteco.

"Proactive government initiatives and ongoing infrastructure development are expected to boost market sentiment and drive investment in the UAE. The latest positive announcements include the freezing of school fees for the academic year 2018-2019, as well as the introduction of a 10-year residency visa for investors and specialists, and 100 per cent foreign ownership of companies outside free zones. The UAE is continuing to live up to its reputation of being a real estate investment haven, and the new laws will attract an untapped pool of international investors," said John Stevens, managing director of Asteco.

Northern Emirates
In Sharjah, rents continued their downward trend dropping on average by 2 per cent in the last quarter and 11 per cent annually, with the most prominent drops recorded in Al Butina and Corniche (4 per cent), observed Stevens.

Among the Northern Emirates, high-end properties in Ajman recorded the highest annual decline of 13 per cent, putting the average rent for a three-bedroom unit between Dh40,000 and Dh53,000. However, the drop for the same unit type in Ras Al Khaimah was less pronounced at 7 per cent, with rents averaging Dh95,000 per year.

Stevens said: "While the Northern Emirates continue to attract both tourists and expatriates, rents are not likely to recover in 2018 due to increasing supply. However, the Northern Emirates will remain popular among residents looking to invest in more affordable accommodation and in holiday destinations.

"Ongoing infrastructure works, advancements in the legislative framework and government-backed, large-scale development projects, as well as the launch of hospitality projects are expected to propel investments and tourism growth in the Northern Emirates."

Abu Dhabi
In the UAE's capital city, apartment and villa rents witnessed annual declines of 10 per cent and 9 per cent respectively. The highest drops in the villa rental market since Q2 2017 were seen at Golf Gardens (14 per cent) and Al Raha Gardens (13 per cent), according to Asteco.

Al Ain
In Al Ain, villa rents fell by an average of 7 per cent since Q1 2018 and 12 per cent annually, with a more pronounced drop recorded for larger four- and five-bedroom units, particularly on properties where rates and incentives were not aligned with the market.  

Stevens pointed out: "We are witnessing a shift in rental trends among residents in the Garden City. They now appear to be taking advantage of the decline in prices to move to high-quality, self-sustained communities with supporting facilities. Such communities recorded high occupancy levels, in contrast to stand-alone buildings and villas that reported minimal uptake and high vacancy levels. To attract and retain tenants, landlords continue to offer incentives of up to one month of free rent and flexible payment terms of up to 12 cheques."

- deepthi@khaleejtimes.com