New master plan communities such as Jumeriah Village and Dubai Sports City are outstripping rental demand in Dubai’s historical prime locations, the latest property figures show.
Average residential rents increased nearly 14 percent in the first half of the year, pushing up the annual average by more than 30 percent, according to CBRE.
In the most recent months, new master planned communities attracted the highest growth, marking a shift in the trend experienced during 2012.
Following the 2008-09 property bust, when the value of Dubai property fell by about 60 percent on average, prime locations such as Dubai Marina, Palm Jumeirah and Downtown were better able to hold their rents than less desirable locations.
They also recovered much faster, experiencing rent increases sooner than other areas.
However, according to CBRE, price hikes are now filtering down the chain as renters seek more affordable accommodation, particularly in emerging communities as community facilities and infrastructure are completed and retail outlets open.
“Although prime locations continued to see growth, the comparative affordability of projects such as Jumeirah Village and Dubai Sports City have made them popular cost-sensitive options for tenants, and that has subsequently driven up rents,” a CBRE report says.
Villa rents rose by nearly 6 percent during Q2, in the sixth consecutive quarter. Smaller two bedroom units registered the highest rate of growth, rising 36 percent year-on-year reflecting renters’ increasingly downsizing as prices rise.
“The rising cost of residential rentals in Dubai is now being noticed, with some residents downsizing or relocating to more affordable communities,” CBRE head of research Matthew Green said.
The shift in the property market back in favour of landlords was causing a greater number of rental disputes as tenants fought against what they deemed to be excessive rental hikes.
“Over the past 12 months landlords have become increasingly bullish, leading to an increasing number of rental disputes being raised at the Rent Committee,” Green said.
Property sales also have continued to improve.
About AED28.8bn ($7.5bn) worth of residential transactions took place in the emirate during the first half of the year, according to Dubai Land Department figures.
About 80 percent, or AED23.2bn, was paid in full with cash.
While traditionally popular areas were becoming too expensive for some renters, they remained popular among buyers.
“Dubai Marina once again recorded the largest number of transactions with 3,748 transactions amounting to over AED6.6bn,” Green said.
“The established residential locations, such as Dubai Marina, Emirates Living [including Emirates Hills, Meadows, The Lakes, The Springs], Palm Jumeirah and Downtown Dubai, continued to dominate the sales market, with the majority of all transactions both in volume and sales terms.”
Dubai’s recovering economy also is helping the office market, with numerous firms seeking to expand, including major international corporations looking to create new headquarters in prime locations, according to CBRE.
The overall office vacancy rate has been high for some time, but there is little top quality space available, encouraging new developments while leaving poorer quality offices vacant for extended periods.
Good quality office accommodation in Jumeirah Lakes Towers, Business Bay and Tecom saw rents rise by 6 percent during the second quarter.
Average secondary office rents are now AED1,050/m²/per annum, with inferior quality strata accommodation in less desirable locations still about half that rate.
New office blocks in free zones in Business Bay and near the World Trade Centre have seen total office stock surpass 7.5m m²
CBRE expects prime location rents to continue to grow during the second half of the year.For all the latest GCC news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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