Dubai rents fall fastest in prime areas as jobs market weakens

Dubai rents could fall by as much as 5 per cent this year, with the biggest drops in prime areas including Dubai Marina and Palm Jumeirah, according to Cluttons.

The consultancy said that rents in prime areas are likely to fall by up to 7 per cent, driven by a decline in demand for luxury apartments. Overall, rents are expected to decline in the range of 3 to 5 per cent

Richard Paul, the head of residential valuations at Cluttons, said that average rents fell by 1.3 per cent over the quarter and are 3.5 per cent lower year-on-year.

But high-end, one-bedroom apartments in Dubai Marina, Downtown Dubai, Palm Jumeirah and DIFC have dropped by almost 10 per cent year-on-year.

“Weaker demand as job creation rates slow is fuelling the declines in the rental market, which has remained exceptionally resilient in the face of some very challenging local and macroeconomic conditions over the past 12 to 18 months,” said Mr Paul.

Rents in more affordable areas such as Jumeirah Lakes Towers, Discovery Gardens and International City remained flat, however, as renters sought out cheaper space.

Sale prices fell by 2.2 per cent in the first three months, the steepest quarterly drop for five years, said Cluttons.

Prices were 4.4 per cent lower year-on-year, with the biggest price declines for high-end villas – The Lakes at Emirates Hills was the worst-performing area, reporting a year-on-year decline of 13.3 per cent, Cluttons said.

Mr Paul said that job losses, particularly in senior banking roles and in the oil and gas sector, had led to more negative sentiment and weakened rental demand at the top end of the market.

Although premium apartment sale prices have held up compared to villas, transactions have slowed and Mr Paul said that apartment prices in this segment could also begin to fall.

Although its forecast of a 3 to 5 per cent rental decline is similar to that predicted by JLL last week, views on market sentiment differed.

JLL said last week that it expected prices to bottom out over the summer and a recovery in the second half of the year, but Mr Paul said uncertainty over oil prices, which has a knock-on effect on banks’ liquidity, meant a recovery in the short term was unlikely.

“As we move into the summer, we see the sentiment on oil prices not having a particularly favourable effect on the market and there will maybe be fewer buyers. We feel [sales prices] have got a little bit further to go. I don’t think we’re there quite yet.”

The property portal Bayut reported a 3 per cent year-on-year decline in rents in Dubai during the first quarter of this year and a 6 per cent fall in sale prices.

It said that demand for cheaper space in tertiary areas has created opportunities for investors, with lower prices and stable rents in areas such as Dubailand and Dubai Sports City pushing rental yields as high as 9 per cent.

“Dubai’s suburbs are ideal for both new home buyers – who can still benefit from low prices – and investors, who can enjoy impressive rental yields,” it said.

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