Saturday, July 26, 2008

Dubai rents likely to stabilize after record growth phase

Although the slowdown in residential rates continues in Dubai, there is light at the end of the gloomy rental tunnel, reports Gulf News.

Dubai, with its large population, has witnessed the negative effects of rental increases that stretch beyond the wallets of common man. Hence, such news comes as solace for Dubai population.

However, there will be no considerable residential rental increase compared to that during the past three months. On an annual basis, the average residential rates in Dubai, increased by 22 percent, says Asteco's quarterly report.

The Research Manager at Cluttons UAE, Mathew Green, says that although the current rental growth is lower than what was seen two years ago, the figures continue to remain strong and unmanageable for the majority.

He revealed that, however, no significant declines in growth rates are likely during the next few years, with supply failing to meet the high demand. The rental growth for apartments is being overshadowed by villa market with acute shortage fuelling huge increases.

According to Asteco, the increase in rents of villas is the direct result of continuous undersupply, marking a 20 percent increase compared to the previous quarter.

"The continued undersupply of townhouses and villas, compared to growing demand from UAE nationals and well-earning expatriates have led to huge leap in villa rents," said Asteco report.

However, the supply of mega-projects such as the Dubai Waterfront, Dubailand and the Jumeirah Golf Estates will help in soothing the undersupply during next two years.

Better Homes, agrees that the residential rates are unlikely to drop and in contrast, it is likely to increase during the first and second quarters of 2008. However, there is stability, due to rent caps imposed for tenants residing in existing properties. However when considering leasable properties in these areas, rents are still on the rise, due to undersupply of rentable properties.

According to analysts, the rates will begin to stabilize when more developments are delivered. It has been noted that Sheikh Zayed Road in Dubai is one of the most popular locations, recording highest annual rental growth of 51 percent. This is followed by Bur Dubai with an annual rent increase of 42 percent. With the availability of rentable accommodations coming only from new apartments, landlords are taking advantage and demanding high rents from desperate home-seekers, it is said.

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