Arabtec chief predicts fall in UAE rental prices

UAE RENTS: Arabtec's chief exec predicts a 'health correction' in rental prices in the country as more properties come on line. (Getty Images)

Soaring rental prices for accommodation in the UAE will start to fall once more residential developments for rent come on line, the chief executive of Arabtec Holding has said.

Riad Kamal said more developers would have to take extended loan agreements from banks as they became more reliant on income from property rents as the housing sales market continues to slow.

But Kamal said an order book worth 50 billion dirhams ($13.6 billion) would ensure Arabtec, the largest UAE construction firm by market value, at least maintains its current turnover of just over 8 billion dirhams ($2.2 billion) for the next two and a half years

He said he was optimistic there would be no defaults on major projects Arabtec was building for its clients such as Emaar, for which it is building the iconic Burj Dubai and residential developments.

“Even if we don’t pick up any further work we can maintain at least a minimum of our current turnover for 2008 at least for a good two and a half years from today with our current backlog,” Kamal said.

“In the short term we believe it will be business as usual as we do not see any signs of our major institutional and public clients scaling down any of the projects in which we are involved.

"This is due largely to the fact that if you take Emaar, for example, their units are already sold so they want to deliver them according to schedule. If there are any defaults they will be minimal and there shouldn’t be any difficulties in them fulfilling their financial obligations to us.”

Kamal predicted there would be a “healthy correction” of “very unreasonable” accommodation rents in the UAE as more residential developments were completed.

“There is a huge demand for rented accommodation and that’s what is escalating the rent today,” he continued. “What we are going to see is a healthy correction as more accommodation becomes available, helping to reduce the rents which today are just very unreasonable.

"And the undersupply of liquidity means there will be less buyers in the market and more extended loan agreements to the developers so that they can rely on cashing in on rents rather than cashing in on sales.”

But he said he did not expect the credit crunch to hurt the Gulf in the same way as the US and European markets had been affected because the banking system operated differently in the region.

He said Arabtec was considering tendering for new residential and infrastructure projects within the UAE but refused to specify which ones.

Kamal said a third of the $13.6 billion projects Arabtec was involved in were outside Dubai and Abu Dhabi.

Print | Email | Discuss this article |

READERS' COMMENTS

Rents will stabilise - not reduce
Posted by Karan, Kuwait City, Kuwait on Monday 10 November 2008 at 22:57 UAE time

These kind of comments are just shooting in the wind. With an under supply of finished home, ready properties are probably going to stabilise and not see huge escalations. A 4 bedroom villa in a good Dubai community is going to remain in the Dhs 300 to Dhs 350 range.
Just servicing a loan for Dhs 5 Mio at 8% makes it cheaper to rent at these rates than buy.

Dont hold your breath indeed!
Posted by Rainigade, Dubai, UAE on Monday 10 November 2008 at 17:56 UAE time


Krisz - the likelihood of your current landlord willingly charging you less next year is very very slim.

Then again - I'm guessing that if you can afford AED300k a year on rent, you dont particularly care about the normal people who want normal apartments in normal areas. So forgive us if we dont care that the discount you want (50k) is a little less than how much some of us pay for a one-bedroom apartment.

My comments were mostly based on apartment rental, which usually sees short term speculators and those investors interested in flip-deals in any case.

Just have a look at how many apartments are currently standing empty in JBR, JLT and International City.

Not quite sure about AED300k villas!

Rentals
Posted by Parag, Abu Dhabi, United Arab Emirates on Monday 10 November 2008 at 15:59 UAE time

I too hope that property holders will off-load more and more properties in the rental market since the resale price as well as the market both are heading towards a great correction.

Once more properties are offered, rent has to come down definitely. No second thought on that.

Renatl decrease
Posted by krisZ, Dubai, UAE on Monday 10 November 2008 at 13:20 UAE time

I just paid my rent of Dhs 300K for a 4 bedroom villa. I really look forward to when my landlord says to me "Gee Kris, i'll only charge you Dhs 250K next year", but I wont be holding my breath !

View all comments (6) >>

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Security Code *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM