Property expert predicts up to 25% drop in rents

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PROPERTY PREDICTION: Rents are seen falling by up to 25 percent during the next 18 months.

The managing director of the Dubai Real Estate Institute (DREI), which aims to develop the emirate's property sector leaders of the future, sees rents falling by up to 25 percent over the next 18 months.

Dr Salem Al Shafiei also predicted that layoffs among sales and marketing staff were likely to continue in an interview with Arabian Property.

“The GCC has always had phases of ups and downs due to oil price changes. Before it gets better it will get worse but it will get better ultimately – like the traffic in Dubai,” he said.

Al Shafiei believed the market would see some supply and demand challenges in 2009 and predicted that about 45-50,000 units will enter the residential market between the first and third quarters of the year.

He also sees rents dropping by up to 25 percent over the next 18 months.

“This is from an already inflated base and it is not that people are losing money but people who wish to make high returns in a short time have to revisit their numbers. That is happening all over the world,” he added.

Al Shafiei said he believed there was a shortage of property management experts in Dubai and the DREI was adjusting the focus of its real estate course to reflect this.

“In the Institute we have shifted gear from a period where we used to focus, in a big way, on real estate development. Now that it is slowing down we are shifting gear to real estate management.”

He applauded Dubai government's budget for 2009 for including some capital intensive projects such as the completion of the metro network and the construction of the new airport.

Al Shafiei also called on developers to incorporate more middle or lower-end accommodation in future projects.

“What is needed is for the government to start encouraging this and to introduce and offer incentives for a better housing mix.”

For the full interview and a special feature on how the major players see the real estate industry in 2009, see the next issue of Arabian Property due out at the end of Feb.

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READERS' COMMENTS

Eh?
Posted by dave, Dubai on Sunday 22 February 2009 at 14:31 UAE time


Is this 25% drop in addition to the 50% that has already taken place? I hope so...

Shame he wasn't able to elaborate on what his 'property management' intiatives would consist of? Up in Discovery Gardens - they just leave the doors open- job done. Not sure if there's much money in that though.

As for Maggie; I don't believe anyone in Dubai expects to rent a place for 'practically nothing' and you may struggle to find neutral sympathisers over claims of being 'victimised'. However you do mention some interesting points about the rental structure differing from other countries and I would like to add a point that you have neglected to mention: In most countries - it is the landlords pay the agency fees. It's very odd that the customer gets lumped with the bill in the UAE. I think this should definately be taken on by the landlords.

no need for middle/lower income property now
Posted by paul, Dubai, UAE on Sunday 22 February 2009 at 13:09 UAE time


During the boom there was most certainly a misallocation of resources. There should have been a focus on building a sustainable mix of property; let's say 10% luxury villas, 20% luxury apartments and the rest more basic apartments and dorm accomodation. This is what the population demographic needed. Instead every single developer piled in building 'luxury' property because that is what the investors/speculators would buy.

But since the market turned, building more 'low cost' accommodation is unnecessary. There is a huge surplus of property already - although at the 'high end'. So what will happen is that much of the property intended to be at the high end will end up where the demand is - lower and middle income workers.

In 2-3 years, it will all balance out. Rents and prices will fall heavily across the board. The Marina, JLT, Greens and other high density areas will end up as low end low cost accommodation for service sector staff.

There will be a balance reached in Dubai, but because of the overhang of high end property, the path of least resistance will be conversion of high end existing property down market.

Rents going down
Posted by J Thomas, Dubai, UAE on Sunday 22 February 2009 at 09:18 UAE time

Maggie, I agree partially with what you said, but greedy Land Lords trying to charge rents as high or higher then New York, Zurich, Paris etc. is unrealistic, this is the middle of the desert at the end of the day, furthermore "all" the so called amenities at these buildings, most of the time are non-existant or not functional, surely you know that. Aside from that you live in constant construction noise and dust. So Land Lords wake up and smell the dust, charge a fair rent where you make your money but do not gouge people, greed is a bad thing and will bring you down... it is doing that already... This is the desert not a mega metropolis with all infrastructure needed available, maybe in 15 years, but not now, and if you and Lords continue behaving the way you did, you will never see high rents again. Good luck to you all.

More middle or lower-end accommodation in future projects
Posted by Sabu, abu dhabi, uae on Saturday 21 February 2009 at 20:53 UAE time


The suggestion by the author for "More middle or lower-end accommodation in future projects" is definitely welcome.

It dosnt make any sense when all these high end building are empty and middle class people are running around to find accomodation.
There is a huge demand for middle class accomodation, and if there had been enough residences of this category build in dubai , things wouldnt look this bad for the developers. I guess they forgot that you shouldnt put all the eggs in the same basket.

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