The rise of house prices and rents in Abu Dhabi has created "breathing space" for Dubai's struggling real estate industry, a developer said on Tuesday.
Mohammed Nimer, CEO of MAG Group Property Development, said the UAE capital’s shortage of supply and high prices has resulted in more people choosing to live in New Dubai, to Dubai’s commercial benefit.
“It’s a mirror image of what happened last year – initially Dubai’s rising rental prices forced expat residents out to Sharjah, Ajman and Ras Al Khaimah, but now the sharp fall in prices is luring them back,” said Nimer.
“These two distinct dynamics that have played out in separate emirates, during different periods, have both ironically resulted in breathing life into Dubai’s residential market at a time when other areas of the UAE real estate market have been left gasping,” he added.
He said that one-bedroom apartments in Jumeirah Lake Towers or Dubai Marina were now renting for around AED60,000-70,000 a year, at least AED30,000 less than last year.
“It’s easy to forget, amid stagnant off plan sales, that the heartbeat of Dubai’s real estate industry, leasing sales, is still ticking,” added Nimer.
He said David Macadam, director of Commercial Division, Better Homes, had reported 400 lease transactions in Dubai in May, compared with between 200-300 per month in 2008.
A third of these were new entries from the UK, Europe and the US, who were mostly mid-level managers, a third were from outlying emirates, and a third were residents who were shifting internally as district prices drop.
“Clearly we’re still in a global recession – and need to manage our expectations accordingly. The general picture will be a lot clearer after Ramadan – whether expatriates have indeed returned after the summer break, with their families, alone or not at all,” said Nimer.
“In my opinion, Dubai and Abu Dhabi now have built up a momentum – albeit one that’s stuttered in recent months – but the ripple effect will be felt most acutely in the outlying emirates,” he added.
“It’s no secret many projects in the Northern Emirates are being radically modified, due to investor worries and issues surrounding power supplies. Uncertainty also surrounds some other projects there – and neither can fall back on leases with any real confidence, with ‘negotiable’ rents in many areas of Dubai,” said Nimer.
Dubai-based Moafaq Al Gaddah Group of Companies (the MAG Group) has a property portfolio in excess of AED3 billion.