By Claire Valdini
Well-heeled communities like Emirates Living and Downtown see further gains in quarter
Average apartment rents in Dubai increased two percent in the second quarter with those in well-located communities such as Emirates Living and Downtown Dubai rising five to eight percent quarter-on-quarter, according to new data.
New residential districts continue to feel some downward pressure with lease rates in Jumeirah Village, for example, declining five percent. Those in Dubai Sports City, Motor City and Business Bay were unchanged, property consultant CBRE said in its quarterly real estate report.
Villa rental rates in the emirate rose two percent, taking the average increase to five percent during the first six months of the year. The cost of renting a villa is expected to remain steady throughout the rest of the year, said CBRE.
“Although there are major villa projects in the pipeline expected to enter the market in phases during the coming months, it is unlikely that this new supply will have a significant impact on lease and occupancy rates in established locations,” noted the report.
“However, new and emerging villa communities may initially see rise of competitive offers as investors look to avoid void periods amidst new supply,” it added.
The real estate market in Dubai is slowly recovering after prices plunged 60 percent from 2008 peaks. But while residential house prices remain steady, the emirate’s commercial property market remains comparatively weak amid new supply.
“Landlords of older properties within the CBD area are likely to struggle to maintain existing lease and occupancy rates moving forward, and this could result in average rents falling slightly after six straight quarters without movement,” said CBRE.
A limited number of well-located offices, however, “are likely to be able to command a notable premium and may see a limited upturn in rents in the medium term,” it added.
Dubai will aim for economic growth of 4.5 percent his year, up from a forecast uptick of more than three percent in 2011, Sheikh Ahmed bin Saeed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee, said in February.
The number of residential real estate transactions increased 15 percent in the second quarter with the total value reaching AED7.1bn. The average transaction value during the three months ending June 30 was AED1.2m, according to data from Dubai Land Department.
“The regional transaction market is forecast to maintain its positive footing during the remainder of the year. However transaction volumes may be more constrained in the third quarter due to the slowdown during the summer and Ramadan wherein historically the Middle East’s markets remain subdued,” said the report.
While prime office lease rates are expected to remain stable over the next six months, offices in DIFC will continue to show further signs of a two-tier market, it added. “The DIFC market is likely to see mounting downward pressure on lease and occupancy rates, driven by an influx of strata owned space from private developers.
“However, occupancy rates within the more popular DIFC managed office properties are anticipated to remain high as a reflection of the two-tier market that is now emerging within the project.”