Dubai Rental Prices 2016
It is, at time of writing, too early to predict exactly where Dubai Rental Prices 2016 are going to go. If there is a continuation of Dubai Rental Prices 2015, then the liklihood is that prices will decline (see updates at the bottom of this piece).
It is estimated that thousands of new apartments and villas that have completed in 2015 and early 2016 will come to market for rental, forcing prices down further.
An Asteco report in 2015 showed that as of the second quarter of 2015, rental rates for apartments in Dubai had declined somewhat over the previous 12 month period.
The report claims that apartment rental rates declined by 2%, on average, in Q2 2015. This was the first time in the previous 12 months rental rates had fallen below their previous years’ levels, which was also a decline of 2% for the same period. It contended that if the trend continued, tenants are likely to see limited increases or even some decreases in rental rates upon lease renewals. It is estimated that rents had dropped by 5 per cent by the end of 2015.
It is estimated that 12,000 apartments and 2,000 villas were completed by the end of 2015. This new supply is putting downward pressure on rents to bring them to more affordable levels. Residents of the Emirate will welcome the news as apartment rental prices have increased by 65 per cent, and villa rental prices by 55 per cent since 2011, although they are still 25 per cent lower than market peak in 2008.
According to Asteco, villa rental rates are likely to “remain relatively stable” in popular areas, while those in “less desirable” locations are forecast to post “marginal declines.”
This slowdown in rents will likely strengthen Dubai’s claim to being an ideal place for budget-conscious tenants when compared to neighbouring Emirate, Abu Dhabi. The UAE capital is a more expensive place to rent a residential unit and is likely remain that way.
Demand in Abu Dhabi still far exceededs current supply making it an owner/landlord’s market with very steep prices.
Update: March 2016
In January Dubai apartment rents declined in certain areas while increasing in others. Average apartment rent in Dubai across all categories remained close to Dh138,000. This is a three per cent increase over December 2015’s average of Dh134,000. Dubai property prices 2016 have been trending lower over the past year with rents remaining strong. Consequently the yield for investors in apartments have become quite attractive. Apartment yields across Dubai were estimated at a little over six per cent, although investors can experience yields of up to 10 per cent depending on location and quality of the project in question.
However, not all categories posted rental increases. Average annual rents for studio apartments at about Dh59,000, show a negligible one per cent decrease compared to December 2015.
One-bed apartments average of Dh97,000 in January 2016, a 0.8 per cent decrease, while 2-bed and 3-bed apartments posted 0.1 per cent and 2.2 per cent increases with average annual rents of Dh151,000 and Dh211,000, respectively.
In the 4+ bed category the market saw a rental decline of 2.2 per cent in January 2016, down to an average of Dh330,000 from Dh337,000 in December 2015.
Property yields have increased across all property sizes. Studio apartments offered average yields of 7.23 per cent, 1-bed apartments 6.4 per cent, 2-beds 5.7 per cent and three-bed category returned 5.3 per cent of the unit cost in January 2015.
Larger 4+ properties are offering the least yield at 3.55 per cent.
Update end quarter one 2016 courtesy of Better Homes:
Dubai Marina remains the most popular locality for renting apartments in Dubai in early 2016. The rest of the top five rental locations in Dubai are Jumeirah Lakes Towers. Bur Dubai, Downtown Dubai and Business Bay.
Dubai Rental Prices Q3 2016
Average rental rates remained unchanged this quarter, despite some adjustments in various localities. We also noted a widening of the rental range between buildings in the same communities.
Some of the more affordable communities that recorded growth this quarter are now reaching a critical mass of Residents leading to the completion of supporting facilities, retail, services, and landscaping. This includes Jumeirah Village Circle and Dubai Sports City where rates were up by 2% and 3%. The latter also recorded the highest growth over the year, averaging 13%.
The mid to high end segment also saw some movement, with Business Bay recording a 5% decline compared to the previous quarter due to new supply being handed over.
In comparison, rates in Downtown Dubai were up by 1% due to the lack of new supply. However, the next few months could see a reduction in rental rates as more stock is expected to be handed over, not only within the community, but also in neighbouring City Walk by Meeras.
Overall, value for money and budget have been the main drivers for Tenants to downgrade to smaller units or to relocate to cheaper communities and this trend is likely to continue in the foreseeable future.
Dubai 2016 Villa Rental Rates
Whilst overall villa rental rates were stable this quarter, we noted a significant year-on-year decline in Jumeirah and Umm Suqeim by 19% and 12% respectively. This was due to a combination of factors, including a substantial amount of new supply being handed over and also generally an increasing number of budget conscious.
Tenants. Given that Tenants now have a wide range of options to choose from, they are also more likely to negotiate with their existing Landlord; and if their requirements are not met, they will vacate. Whilst this was noticeable in Jumeirah and Umm Suqeim, this trend has spread throughout the wider market.
Other areas affected by declines were Arabian Ranches Phase II (-8%) and Al Barsha (-2%) as the amount of available supply has led Landlords to reduce their rates to improve take-up.
Mudon and the Springs are two areas that recorded a quarterly increase of 1% and 3% respectively. Mudon’s popularity increased as the community has a completed feel to it and only a few units remain available, whereas the Springs continues to attract good levels of demand given its popular location.
With more handovers expected in the next few months, we anticipate villa rental rates could come under further pressure.
This Q3 Dubai Rental Report is courtesy of Asteco – you can download the full report here.