• Home
• /
• Local business

Rents to Decrease in Dubai Amid Supply Growth

DUBAI — Rents in Dubai are likely to fall further as new residential projects will come on stream in the next two years, a study said on Monday.

Landmark Advisory said that strong demand stabilised rents in June and July, with rental prices for a two-bedroom flat in Dubai Marina increasing by about six per cent to Dh80,000 to Dh170,000 in August, from Dh75,000 to Dh150,000 in July.

“The increasing rents can be attributed to a lack of supply, many landlords have removed inventory from the market to avoid renting out at current market rates, while others may be out of town during the summer period and consequently unavailable. We predict that the month of Ramadan will also affect the leasing supply as many landlords are waiting until the fourth quarter to reassess the market, ” said Charles Neil, Chief Executive Officer of Landmark Advisory.

Neil said that demand for property was strong in June and July as a lot of rental contracts ended during the period, and this ultimately created a temporary supply distortion.

The “marginal” rent increase, he said, is unsustainable, as new supply will be on stream in the next 12 to 24 months.

“As early as September or October, rents may come down again. Many landlords do not want to rent at marked down rates and have kept supply out of the market in the meantime to create an artificial shortage, but then they have to contend with new units to be opened,” Neil told Khaleej Times.

He estimated that at least 20,000 additional units will come into the market annually for the next two years.

Landmark Advisory said that rents in many areas of Dubai have decreased significantly over the past five months, but some areas are performing well like the Arabian Ranches and Palm Jumeirah where rental rates have returned to March 2009 levels or increased marginally.

Neil said that with the supply glut, end-users are opting to move to preferred areas that have become more affordable. These areas and unit types will be the first to recover in terms of rents, he said.

“The one and two-bedroom apartments, and three to four bedroom villas were the most sought after unit types in the leasing market,” said Neil.

The Landmark Advisory study showed that relocation demand is continuing to drive the leasing market.

· rocel@khaleejtimes.com