Sunday, February 21, 2010

Falling demand leading to low rentals in northern emirates

The rents in the northern emirates have dropped considerably since 2009, given, the fresh supply and low demand. Even the lease rates have dropped 29 percent during the first half of 2009, says a CB Richard Ellis market report.

The trend is likely to continue into first half of 2010, due to weakening demand and huge supply from within the northern emirates and the border areas of Dubai, such as Muhaisanah, Al Nahda and Al Ghusais.

The demand is low or almost non-existent in the market, although the rental market is witnessing some movement, particularly from tenants seeking better quality property, said Mohanad Al Wadiya, Managing Director, Harbour Real Estate.

The maximum decline in rentals was noticed in the case of single bedroom apartments, which dropped 34 percent, while double and triple bedroom apartments dropped 29 percent and 25 percent respectively. This drop may be largely due to people opting for larger flats with lower rent on the offer in comparison to previous months.

Ajman and Ras Al Khaimah also witnessed drop in values by 50 percent or more for off-plan properties. The gaps between rental rates, however, remained the same among various northern emirates. Sharjah continued to demand highest rates, followed by Ras Al Khaimah, Ajman, Fujairah and finally Umm Al Quwain, the most affordable northern emirate.

Among these emirates, Ras Al Khaimah is witnessing maximum progress, while Sharjah and Ajman are on hold or are progressing very slowly.

Al Hamra Village is the only project with 90 percent completion rates, and 80 percent occupancy, with only one residential tower remaining to be completed in front of the resort. The rate at the Ras Al Khaimah's Al Hamra village is 30 to 35 percent higher, in comparison to other developments in the region.

Also, the Bab Al Bahr project on Al Marjan Island, a sister development of Al Hamra Village, by Rakeen Properties, is also progressing on schedule. The first and second phases of the project are complete, while the third and fourth phases are nearing completion.

Even La Hoya Bay project by Khoie Properties, now undertaken by Rakeen, is being developed for delivery by 2011.

The Mina Al Arab development, the Pacific, all located at the Al Marjan Island is also due for delivery in 2011.

With more residents opting to move to border areas of Dubai, where there is better quality stock and competitive lease rates, the leasing rates across the northern emirates continue to decline in 2010, Al Wadiya said.

To add to this, high percent of residential accommodation is offered by the northern emirates, and this has stemmed from their fast-growing southern neighbour (Dubai), and this helped excessive expectations for new units, said Mat Green, Associate Director, CBRE - Middle East.

To prevent this exodus, landlords in the northern emirates are now offering rent-free periods of up to one or two months, free chiller, free parking spaces, and more such incentives, it is said.


Dubai Blog said...

I agree with the statement that the prices of properties in north areas of UAE than Dubai. This decline is due to the excessive supply of residential apartments and office buildings and also due to the financial crises. To add up this is the opportunity for the small investors to buy properties and after some interval they will be owner of the valuable properties.

dubai property said...

I agree with you in general. Buying a home is an expense not an investment – and a home loan guarantees the greatest possible expense. The stock market is mainstream gambling but at least you know exactly what you stand to lose. As far as I can see some legitimate reasons to purchase a home are to live in it