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Dubai residents continue to enjoy low rents in Q1

Dubai - 11% year-on-year rental decline gives an opportunity to residents to relocate to better residential facilities.

Tenants in Dubai continued to enjoy low rents during the first quarter of 2021 as it declined by 11 per cent year-on-year basis due to stiff competition in the residential market, latest data showed on Monday.

The first quarter 2021 Dubai real estate review issued by ValuStrat said residential rents were relatively stable when compared to the previous quarter, as it registered less than a per cent decline during the January-March period. The real estate consultancy also noted a 3.9 per cent year-on-year hike in villa rents.

The ValuStrat report said average rents for residential units in Dubai stood firm at Dh76,910 during the first quarter.

“Tenants paid Dh55,000 average rents for apartments and Dh211,485 for villas across the Dubai,” according to the report.

The data further indicates that Dubai’s residential net yields averaged 6.1 per cent during the quarter, with apartments yields standing firm at 6.4 per cent and villas at 4.9 per cent. It also pointed out that residential occupancy was estimated at 80 per cent during the quarter.

Average annual rents for 2-bed villas stood firm at Dh103,000 while 3-bedroom and 4-bedroom villas were available at Dh150,000 and Dh212,000, respectively.

The report said Dubai tenants paid an average of Dh35,000 yearly rent for studio apartments, Dh52,000 for one-bedroom, Dh78,000 for two-bedroom and Dh114,000 for three-bedroom apartments.

Expo may drive rent up

Industry stakeholders are of the opinion that rents for residential units in Dubai will go up in the second half of the year ahead of Expo 2020 in October.

Rizwan Sajan, founder and chairman of Danube Group, said the pressure will continue on the rental rates and all asset classes this year until the economy improves a bit or recovers from the pandemic shocks.

“With the expected supply that is / will be delivered this year (42,500 units ) an increase in rent won’t be that feasible. Expo 2021 is unlikely to have a significant direct impact on the real estate market, it could possibly boost market sentiment,” Sajan told Khaleej Times on Monday.

Imran Farooq, CEO, Samana Developers, said the current trend of increase in rents in villas and townhouses will be converted into across-the-board recovery due to the magnitude of the six-month-long Expo 2020.

“Recently, the UAE government reiterated its target of over 25 million visits, combined with the introduction of Covid-19 passports and online features of the Expo, which will improve in-person and online visitors and tourists influx,” Farooq told Khaleej Times on Monday.

said Haider Tuaima, head of Real Estate Research at ValuStrat, said rents may go up in certain areas ahead of Expo 2020.

“The general theme for the remainder of the year is that average citywide rents are expected to stabilise, however, there will be pockets of increased asking rents in well-established locations,” he said.

Record sales transactions

The Dubai-based real estate consulting firm also reported the highest number of home and office units’ sales transactions during the first quarter and said the office ValuStrat Price Index (VPI) has stabilised while the residential VPI saw quarterly improvements for the first time since 2014.

The residential VPI showed an average quarterly improvement of 0.8 per cent, as the first three months of the year saw accelerated positive trends for the first time since 2014. All established freehold villa locations monitored by the VPI saw capital values improve since the last quarter, ranging from 1.8 per cent to 5.4 per cent. However, only half of apartment locations improved in value, some areas saw declines of up to 2.8 per cent.

On an annual basis, all locations witnessed price drops, some in single digits. Best performing freehold areas were International City, Arabian Ranches, the Meadows, the Lakes and Palm Jumeirah. Citywide, residential capital values were 10.9 per cent lower than the same period last year, according to the report.

“A positive trend that commenced during the second half of 2019, only cut short by the Covid-19 restrictions last year, has now intensified with improved investor confidence, boosting demand, with record number of title deeds registered, and a gradual growth towards previous peak,” said Tuaima.

The ValuStrat report further said that office sales transaction volumes surged 41 per cent quarter-on-quarter basis and soared 45.7 per cent on year-on-year basis, while office ticket sizes were 16.2 per cent higher than last year, but 21.7 per cent lower than when compared to last quarter of 2020.

“Improved buyer confidence appears evident in many parts of the Dubai residential market, with statistics showing increased numbers of sales transactions and price rises. Anecdotal agent evidence confirms strong demand and speaks of faster sales campaigns and competitive bidding occurring between some purchasers, especially in villa communities and now also in some of the more sought-after apartment locations too,” said Declan King, managing director and group head of real estate at ValuStrat.

“Influence of the Covid-19 crisis on housing requirements and an undersupply in some communities and sub-sectors are factors as to why this is happening. Other reasons may also include a perception that prices had actually over corrected and that perhaps they now represent good value, with potential for upside gain should this prove not just to be a temporary phase and the market continues to recover,” he said.

— muzaffarrizvi@khaleejtimes.com