By Parag Deulgaonkar
Demand remains relatively stable, with tenants having more negotiating power in the current market, according to Chestertons
Dubai rentals declined in the third quarter 2016 after remaining steady in the second quarter with the lease market remaining tenant favourable, according to Chestertons.
Rents fell between one and two percent in both apartment and villa segment, with two-bedroom units in Downtown Dubai, Jumeirah Lakes Towers and the Greens witnessing the biggest declines.
Average rents for three-bedroom units in Dubai International Financial Centre (DIFC), Downtown and Marina, remained stable.
In the villa segment, Arabian Ranches registered the maximum decline, with an average four-bedroom villa available to rent for AED245,000 per annum. Rents for villas on the Palm, Jumeirah Village Triangle and The Springs remained steady.
“Demand remains relatively stable, with tenants having more negotiating power in the current market. Job losses and lower spending capacity have placed pressure on rates in the second and third quarter,” Robin Teh, country manager – UAE & valuations & advisory director, MENA, said.
Property portal Bayut.com said last month that average apartment rent in Dubai dropped to $34,000 (AED125,000) per annum in the third quarter of 2016, down 2 percent from the previous quarter.
Transaction values declined 29 percent to $939 million (AED3.45 billion) compared to second quarter, while transaction numbers fell 24 percent.
Dubai Marina was the most popular area with sales worth $178 million (AED654 million), the consultancy said.
“Dubai Marina will always be an attractive location for investors with consistently high levels of yields. The highest transaction values remained in the prime areas such as Emirates Living, Palm Jumeirah and Downtown Dubai.
"However, as investors bide their time on the bottoming of the Dubai market, total transaction volume and values dropped in the last quarter, compounded by the traditional lull in activity due to the summer and holiday season,” Teh said.
Sales prices in both villa and apartment sectors fell by around one percent, while the biggest drops were seen in apartments in Business Bay, Discovery Gardens, International City (and The Views, while prices in Dubai Motor City, Jumeirah Lakes Towers and Remraam remained unchanged.
High-end properties on the Palm, over $599 (AED2,200) per square feet - were the only properties that held their value.
In the office market, total transactions fell by 20 percent to $106 million (AED389 million), while values declined by 24 percent. The majority of sale transactions were registered in Business Bay followed by Jumeirah Lakes Towers.
Despite the relatively flat performance for the emirate during the third quarter, gross yields remained stable.
“Apartment gross yields are between six and eight percent, while mid-market communities International City and Discovery Gardens’ gross yields reached nine percent and 10 percent respectively,” Teh said.
Villa gross yields are still in the range of four to six percent with gross yields in Palm Jumeirah and Jumeirah Islands standing at modest three percent, he added.