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Rental costs soar on Dubai's Palm
The price of renting apartments on the Palm Jumeirah has soared by more than a third in the last six months, yet more evidence of Dubai’s rampant property market.
Research by Arabian Business has revealed that rental costs for two and three-bed apartments on the Palm Jumeirah, one of three artificial palm-shaped islands in the emirate, offering a mix of upmarket hotels and residential properties, have risen by 37.5 percent and 33 percent.
Since March, the cost of renting a villa has increased by 20 percent.
A spokesman for Dubai-based Better Homes, one of the biggest estate agents in the emirate, said on Monday: “The high demand and low levels of available rental properties on the Palm Jumeirah has forced prices up quite significantly over the last six months with two bedroom apartments increasing from 160,000 ($43,580) to 220,000 dirhams ($59,898) per annum and three bedrooms rising from 210,000 ($57,176) to 280,000 ($76,234) dirhams over the same timeframe.
"Similarly, villas have risen from 450,000 ($122,519) to 545,000 ($148,384) dirhams.”
Arabian Business spoke to two agents posing as a prospective customer. One said rents for two-bed apartments had doubled since the start of the year, rising from 150,000 dirhams ($40,835) to 300,000 ($81,679) dirhams.
The same agent said rents at the most popular apartments were rising by 5,000 dirhams ($1,360) every two weeks.
Another company said that annual rents for one-bed apartments have now reached 170,000 ($46,285) dirhams on Palm Jumeirah, whereas six months ago people could expect to pay 140,000 ($38,117) dirhams.
The property market in Dubai has grown rapidly in the last few years sparking massive house price inflation and rental growth but experts now say the market could overheat.
In August, Wall Street bank Morgan Stanley predicted that house prices in Dubai will fall 10 percent by 2010.
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Comments 1-9 of 9
Posted by Akhtar Raza, London, UK on 9 October 2008 at 04:00 UAE time
I was looking to invest in a property in Dubai for the past couple of years and made several visits to the place. Having done my own research and met several people in the know (these do not include assorted real estate agents/property developer types), i came to the conclusion that it is certainly not a safe investment, far from it. The whole thing is extremely superficial and what keeps it going is a very glossy, slick and super efficient marketing campaign. What is worse is that other Gulf states are now beginning to follow suit and sooner or later the bubble is gonna burst cos there is simply not that much demand, not in this era of credit crunch and tight money supply.
Posted by alar, NYC, USA on 1 October 2008 at 22:10 UAE time
""The difference in this case is that when the market crashes and the local banks fail, there will be no government bailout.""
History has proven that it never really ever hurts those who have lined their pockets and found save havens for their little trinkets...
it's always, as in the US, main street and Skid-row who are hurt.
Posted by Trojan on 1 October 2008 at 11:49 UAE time
Like Ralph, my hat goes off to the greatest spin machine in history, Dubai Inc. The tentacles of this great hype machine, which start with a legislature that stands in the way of true transparency, do not end at the primary developers. They penetrate every sector that has anything to do with the real estate industry. For example:
- Commercial banking: the local banks use other people's money to fund this massive overbuilding, while Dubai Inc diverts its equity to safer investments in the US and Europe. Thus the recent warning by HSBC of the over-exposure of local banks to the real estate market.
- Investment banks with supposidly independent research. When some foreign I-bank comes out with research warning of a correction in the real estate market, we find a local I-bank responding the next day with claims to the contrary. A recent example is Al Mal's response to Morgan Stanley's research. A simple research on Al Mal's background and principles reveals the extent of which this supposidly independent bank is tied to the hype machine.
- Real estate agencies and re-sellers: Everyone hears how a certain development sold out in a matter of hours or days. Well, guess who has been doing most of the buying recently? There again you will find companies who have previlaged access to the "pre-sales", coming in and buying all or most of the units, only to sell them in the secondary market for a higher price. And who owns these "real estate investment companies"? Well, you are smart enough to fill in the blanks.
And now we have this supposidly independent market research firm trying to indirectly convince us that the astronomical price of Palm Island units are ok because you can get high rent yields for your investments. Well, who the heck is this Better Homes??? (Good choice for name by the way, the same name for one of the US's major developers). And how did they calculate their numbers? Are these medians, means, or just maximums (outliers)? What is their sample size? And what is the basis of their underlying assumption of "The high demand and low levels of available rental properties..."? A casual observor taking a night-time drive through the Palm will notice that the place is a ghost town - all the lights are out, no one is home!
Naz, I lived through the US real estate bubble, and before you start to think the guys here are smarter than Lehman Brothers, you ought to read a little bit of the history to understand why what happened did happen. The same mistakes are being repeated, only on a larger scale (in relative terms). The difference in this case is that when the market crashes and the local banks fail, there will be no government bailout.
Posted by Jon, Dubai, UAE on 30 September 2008 at 14:39 UAE time
Of course rents are going to soar when only one or two buildings are available for rental. It's simple supply and demand. Has anyone ever driven onto Palm Jumeirah at night? Most of the apartments are EMPTY!!! Try releasing every building and the apartments onto the rental market then see what happens to the rental prices....
Come on Dubai, stop this hollow marketing of yourself and wake up to the realities of life. Restricting supply of apartments with naturally push up prices. But it's a false economy. But somehow inkeeping with the superficial nature of Dubai life. Ignore the truth until you can't ignore it anymore...
Posted by Fred, Dubai, UAE on 30 September 2008 at 14:27 UAE time
It's not just the Palm, the rates quoted now seem to be applicable everywhere in Dubai. Great for investors but a nightmare for those working here.
Posted by Ralph, Dubai, UAE on 30 September 2008 at 08:54 UAE time
I strongly believe that Dubai is the biggest and the most successful marketing campaign mankind ever-seen in history. It is a campaign which is reached every corner on earth … I respect them for what they have achieved. Now the property market is seeing a slowdown, so Dubai’s media starts releasing press such as this one ‘Rental costs soar on Dubai's Palm’ and many other Market-Boost headlines … hats off Dubai.
But reality hits when people actually start living & investing in businesses here in Dubai, one realizes that what lies beneath this fairytale is a reality show … it can be frustrating so to speak.
Posted by David M. Nichols, Ft.Lauderdale / Dubai, USA / UAE on 30 September 2008 at 00:06 UAE time
Isn't anyone paying attention to what is happening in the USA right now??? The bubble has burst! If people do not pay attention and put the brakes on this runaway train, i.e. prices. We are going to see the same thing happening in Dubai and all that will be left is an empty shell in the desert. I think eveyone needs to look at the long future, not just the "fast buck".
It all boils down to one thing - GREED!
Posted by Ammar on 29 September 2008 at 16:24 UAE time
The Palm Island is a world icon and a unique premium address. It's only natural for the rates to rise from where they were six months ago. Earlier this year the island still looked like a construction site and was still rat-infested. As it starts to look more like the promised dream it was sold as, the prices start to reflect just that.
Posted by Naz Hussain on 29 September 2008 at 13:33 UAE time
Interesting. Now can we see what Lehman Brothers are predicting about Dubai property prices? What? They don't exist any more? Oh, im sorry.