As prime Dubai rents soar 6% in Q1, some tenants consider buying: report

Real estate consultants say Dubai sees biggest rental rise in the world in first three months of 2014

As prime residential rental growth in Dubai continues to soar quicker than traditional financial centres of London and Hong Kong, some tenants are beginning to consider the merits of purchasing a home, according to a new report by Knight Frank.

Its Prime Global Rental Index revealed that prime rents in Dubai rose by six percent in the first quarter of 2014, the strongest growth in the world.

According to Knight Frank, prime rents in the emirate - where sales price growth has slowed notably since the start of the year - rose by more than 10 percent in the past six months while annual growth was calculated at 16.4 percent, second only to Nairobi.

Knight Frank's report said: "In Dubai, prime rents continue to outpace wage inflation. This is raising concerns about affordability and is leading domestic and expat buyers alike to consider purchasing a home.

"However, the introduction of a mortgage cap and higher transfer fees at the end of 2013 has led some to defer this decision."

While prime rents around the world rose by 4.7 percent in the year to March, they were outperformed by prime capital values which increased by 6.1 percent over the same period, said Knight Frank.

"We expect the gap to narrow as corporate tenant demand – a key driver of prime rents – strengthens on the back of improving economic and business sentiment," it added.

Nairobi topped the annual rent rankings for the fourth consecutive quarter while prime rents declined in Singapore, London and Hong Kong in the year to March.

Kate Everett-Allen, head of International Residential Research at Knight Frank, said: “The key risks for the world’s sales markets could emerge as catalysts for growth in terms of prime rents.”

In April, property consultant CBRE warned that the rising cost of living in Dubai is “starting to become a very real concern for many residents”.

Mat Green, head of Research & Consultancy UAE for CBRE Middle East, said rentals had increased by an average 45 percent in the past two years in the emirate, in what he expected would lead to an increase in occupiers starting to consider Sharjah and the Northern Emirates as a cheaper alternative.

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Posted by: The Consultant

How can it take 3 months to produce a report on Q1 performance? Given the current market conditions it's horribly out of date and they would probably have been better not publishing it.

There is some very careful wording being used - tenants are "considering" buying - in other words they haven't done it so far. And I'd be interested in the basis for the assumption of "improving business and economic sentiment" - the rapid rise in rents, school fees etc. is worrying many businesses. They have learned their lesson from the last boom and in most cases are not prepared to let wages chase cost of living increases.

Posted by: Dragon Face

There is no logic to this market and I constantly question my appraisal from a business owner's perspective. Am I being thick or is this a constant real estate PR exercise trying to push the market for one more month. There are very few positive buy/invest signals right now and this sentiment is what I hear in my own daily meetings and discussions across Dubai. Agree with you "Consultant"

Posted by: Chalky6766

Knight Frank! Why is everything coming from them, I don't believe a word that say, rental or purchase. Please try and get your info from neutral industry analysts and not those with vested interests. There are villas all over Dubai at higher than sustainable sale prices, that's why they are still....unsold!

Posted by: Sa1

They should be talking about Q2 and not Q1.

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