Apartment rents on Palm Jumeirah - arguably Dubai's most popular residential location - slumped by six percent in the three months to June 30 as the emirate's real estate market continued to soften, Asteco said on Tuesday.
The world famous manmade island was among the worst performing rental markets in the city, alongside Jumeirah Beach Residences and Sheikh Zayed Road, the property consultancy said in a new report.
John Stevens, managing director at Asteco, said: "We even saw a 6 percent decline for Palm Jumeirah, with the handover of the lower specification Palma Residences' townhouses impacting rental rates due to their lower price band. So we are seeing a similar tenant-friendly trend in the broader villa market, with more flexible installment plans for example, and this is set to continue as areas like Dubailand continue to deliver new supply."
Across the city, sales and rental rates for apartments and villas in Dubai continued to drop in the second quarter of 2015, reflecting weakening demand.
This was also the principal finding of CBRE’s Q2 2015 Dubai Market View report, also released on Tuesday, which said average residential sales prices have fallen by around 2 percent quarter on quarter – although sales prices still remain around 1 percent higher than during the same period last year.
Asteco’s Q2 2015 UAE Property Review also found that rental rates for apartments and villas across the city declined by an average of 2 percent in the second quarter of this year (a 5 percent year-on-year drop for villas), with more marked declines at the higher-priced end of the market.
Homes for sale recorded an average fall of 2 percent, as well, with some areas performing significantly worse than others.
The highest quarter-on-quarter apartment rental declines were recorded on Sheikh Zayed Road (7 percent), Palm Jumeirah (6 percent) and Jumeirah Beach Residences (7 percent), Asteco’s report claimed.
Conversely, mid-market areas including Dubai International Media Production Zone, Dubai Sports City and Dubai Silicon Oasis recorded higher apartment rentals compared with 2014, of between 6-13 percent, due to completion of community infrastructure and increased occupancy levels.
In the villa segment, the handover of projects such as Casa Villas at Arabian Ranches brought rental rates for the area down by 7 percent quarter-on-quarter and 15 percent year-on-year.
“The softening in Dubai’s residential rental market appeared earlier than we originally anticipated, offering tenants in the emirate an opportunity to recoup somewhat after several tough years of high rents, ” said Stevens.
“Despite strong transaction levels, the increasingly competitive market environment, with a lot of new supply, means that the 2 percent quarter-on-quarter decline is not going to be a temporary blip, with more pressure on owners to review their selling price, still to come,” he added.
Mat Green, head of research & consultancy UAE at CBRE Middle East, said: “Average residential sales prices have fallen by around 2 percent quarter on quarter, mirroring the decline recorded in the first quarter.
“This reflects the current weakening of demand, as well as global economic conditions that have negatively impacted investor sentiment.”
CBRE also analysed the performance of Dubai’s hospitality sector. It found that hotel room revenues (RevPAR) declined 8.3 percent to AED764 over the first six months of 2015 compared to the same period last year, due to the effects of lower occupancies and average rates.
Green commented: “The decline was attributed to the combined effects of lower average daily rates (ADR) and occupancy levels, which fell 6.9 percent and 1.5 percentage points respectively, according to [analysts at] STR Global.”
Average hotel rates may face additional downward pressure from the continued delivery of hotel room supply, CBRE’s report said, noting that Dubai has around 28,000 hotel rooms in various stages of development set to be delivered by 2018.
The report said: “Hotels in Dubai continue to be impacted by the strengthening dollar and depreciation of the euro and ruble, which have reduced Dubai’s affordability for many of its primary source markets.”
Meanwhile, prime central business district (CBD) office rental rates in Dubai have remained stable for the fourth consecutive quarter at AED1,884 sq m per annum, according to CBRE, while secondary locations also saw stable conditions.
However, office rents have risen by an average of 2.3 percent year-on-year.For all the latest real estate 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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