Dubai rents predicted to fall by up to a quarter

Wednesday, 25 February 2009 7:34 AM

A new report has predicted a 25 percent drop in rents for apartments in Dubai in 2009 as the market continues to correct.

While rents are forecast to fall slightly in Abu Dhabi, the study by Landmark Properties says rents for apartments in Dubai will drop by 25 percent and villas by 23 percent.

The report comes just days after the managing director of the Dubai Real Estate Institute (DREI) predicted rents would fall by up to 25 percent over the next 18 months.

Dr Salem Al Shafiei also predicted that layoffs among sales and marketing staff in the real estate sector were likely to continue during 2009.

The Landmark Properties study added that in Abu Dhabi, rents were likely to remain “relatively stable” during the first half of the year or see “marginal declines”, UAE daily The National reported on Wednesday.

Jesse Downs, Landmark Advisory’s head of research, told the paper several factors had caused the capital’s average rents to “hit a ceiling”.

“Residents simply could not afford to pay higher prices,” she said.

Arabian Business reported earlier this month that the cost of renting in Dubai had fallen by up to a third in the last eight weeks.

Research by Arabian Business revealed that rents for villas and apartments have fallen by up to 33 percent in some of the city’s most prestigious locations including downtown Burj Dubai and the Palm Jumeirah.

In a recent report, US bank Morgan Stanley said rents in Dubai were down seven percent in December from a peak last summer, while the cost of renting villas had declined 10 percent.

Last month property services firm Asteco said rents in Dubai and Abu Dhabi were flat in the final quarter of 2008.

Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

Please post responsibly. Commenter Rules

Read All 7 Comments

Posted by: paul Wednesday, 25 February 2009 9:25 PM[UAE] - UAE

Jebel Ali Baba - Prices are determined by supply and demand. If there is no demand, then prices fall. It makes totally good sense to sell at below the construction cost if (a) you expect the price to continue to fall (b) you have no choice because you are a forced seller (individual cannot meet mortgage payments, developer with cashflow problems, bank repossession must sell at auction for whatever can be got, etc.) Selling below the production/construction cost happens in all kinds of markets across the world whenever there is a glut of supply. For example, this is already happening in the UK where apartments in city centres are being sold at below what it costs (and did cost) to construct them. But it happens in all kinds of markets. We've all seen clearance sales at stores where items 'must go', or seen auctions with no reserve. The price of a commodity is determined by supply and demand, not the production cost. Of course, if the price is below the production cost, then you stop producing. But it does not stop the price of what was already produced falling further if demand weakens, even if you add no more supply. Look at Concorde. If it were simply the case that prices could not fall below construction costs, then the government could prop up prices by taxing steel and concrete at 1000% (which would cause construction costs to rocket). But it would have no effect

Reply to this comment.

Posted by: Jebel Ali Baba Wednesday, 25 February 2009 5:41 PM[UAE] - United Arab Emirates

Paul, some (or many) projects will get canceled simply because there is noy enough money to finish them at all. Investors pull out because of the insecure situation and many people who bought already are not able to pay the next installment. Selling UNDER construction cost also makes no sense. We will see it clearer Q3-Q4 this year. Who survives till end of 2010 can be hoping for better business.

Reply to this comment.

Posted by: Property Guru Wednesday, 25 February 2009 4:44 PM[UAE] - UAE

Like any other report they have no substance. The reality is in free hold areas the rents have fallen by 30-50% (Discovery Gardens, Jumeirah Village etc.) However, rents in main city are still the same as there are no new supplies or even vacancy. These rents were already below speculative market rents low due to rent caps. The rents went high same as the property prices went crazy. Both are coming down. It's a good sign and more supply will add to this price correction. The point of concern is not the price now but the occupancy. Any landlord will be happy as long as there is a tenant to use the property. No one likes to keep a empty house. I am happy that this would mean better life for many, savings for some and more affordabe image for Dubai and UAE

Reply to this comment.

Posted by: S Kumar Wednesday, 25 February 2009 2:08 PM[UAE] - UAE

This report contradicts with Reality. Everyone knows this especially on the rentals going up on an average by 30%. Why is it that this data cannot be authenticated from the landlords.

Reply to this comment.

Posted by: Mohad Wednesday, 25 February 2009 1:32 PM[UAE] - United Arab Emirates

Isn't that good? Prices falling means standard of living will increase. No longer people need to cramp in one tiny apartment. People will have enough disposable income to spend as well.

Reply to this comment.

Read All 7 Comments

Log in Not registered? Register now!

Retrieve password form

Services:

Related:

Companies

Also in Real Estate

Also in UAE

Join the Discussion

Further reading

Features & Analysis

Most Popular

Most Discussed