It’s the million-dollar question. What’s the current state of play in the Dubai property market, right now? Everyone has an opinion, but who’s telling the truth? Take the likes of JLL, Asteco and CBRE, for example. We’ve seen a huge amount of information from these agencies in just the last few weeks, and we rely on these fantastic brands for accurate and clear reporting of the numbers. The media picks up on them, and they make interesting reading for anyone thinking of buying, selling or renting a property.
But do they really reflect what’s happening on the ground at this exact moment in time? As a small agency, we focus predominantly on rentals in the upmarket areas of Jumeirah and Umm Suqeim. We’ve carved out a space in the market here simply because we know the area intimately. And it’s through the multiple daily conversations that we have through living and working in this area that we have a front-row view as to exactly what’s going on in this market.
So what are we seeing? Firstly, that recent changes in supply and demand – and subsequently prices – have already put those Q3 reports out of date. It is mind-boggling how fast the market moves in Dubai. Macroeconomic factors, such as the strength of the US dollar and the oil price, plus political and economic uncertainty around the world, can impact the volatile nature of an emerging property market to such an extent that what was accurate in one month is out of date in the next.
Let’s take the example of an excellent local landlord who has a number of compounds in Jumeirah. In one of these compounds, a five-bedroom villa has rented for, on average, AED296,000 ($80,589) over the last 14 months, with one cheque. Based on market conditions, the same landlord rented the same villa last month for AED270,000 in two cheques. Now, obviously this is one small example and could be a statistical aberration. However, what is interesting is the rationale behind the landlord’s decision to lower the rent.
Firstly, the villa had been vacant for a couple of months, when these villas are normally snapped up immediately. Secondly, the landlord had a number of tenants not renewing contracts in other parts of their portfolio. A number of these tenants worked for oil businesses and have had their allowances cut or their contracts terminated. Thirdly, our more professional landlords regard levels of occupancy as more important than the bottom-line rental price agreement. And finally, the level of interest in rentable villas has just not existed in the last couple of months. This landlord engages with a number of professional agents and they haven’t had the normal number of viewings or offers.
The above example ties in neatly with our own experiences as agents. We are currently aware of around 200 empty villas for rent in the Jumeirah area. Six months ago, this figure may have been closer to 120. Our business has around 115 properties listed for rent online at present but we feel we are getting only half the calls that we did before the summer.
Another more surprising example of rental prices being slashed is as follows. In March we rented a five-bed independent villa to a French family for AED250,000 – after weeks of negotiation to get the landlord down from AED260,000. He had an identical villa in Al Manara come on the market at AED260,000 at the end of the summer. Three weeks ago, he called me and said he was fed up and wanted it rented at AED210,000. Sure enough, it was rented within 24 hours but this landlord again has hundreds of units and knows what he is doing.
Finally, we have just agreed the rent on a four-bed bed villa with private pool in Jumeirah for AED285,000. What was the price earlier in the summer? AED360,000. Now we think this villa could have gone in the spring for around AED340,000 but as the market moved south the reduction in price wasn’t catching up with it. With fears of further falls in 2016, the landlord took the best offer he could get and we negotiated very hard for our client and achieved an amazing deal for him.
With regards to sales, we have recently launched a sales arm, with listings both in the Jumeirah area as well as freehold areas. From our modest experience we see that there are a lot of property owners who are still trying to recoup their original investment and are pricing accordingly - and failing to sell. Prospective buyers are continuing to make low-ball offers and are seeking distressed sellers. As agents we are struggling to bring buyers’ offers and sellers’ asking prices closer together. Most commentators seem to expect a continued softening in the sales market for another 12 months at least and buyers are still stalling for time.
Put all of this together, and you have perhaps a bleaker and more current picture than the one that is being painted by the big consultancies. That’s to be expected in a maturing market such as Dubai, but it’s clear that – for the time being at least – it’s very much a renter’s market.
Tregoning & Stockwell was founded by Nick Stockwell and Harry Tregoning in September 2014. Both British and with backgrounds in financial services, they felt there was a gap in the market for a professional local estate agency that could offer the highest levels of service to people looking to rent in the Jumeirah area. In September 2015 Tregoning & Stockwell opened a sales division operating across all areas of Dubai.