Rental rates for apartments in Dubai continue to increase
The residential property market in Dubai is recovering with prices and rents increasing but in neighbouring Abu Dhabi it is a different story as new supply floods the market.
The latest market reports from property consultants Asteco show that it is a case of a tale of two cities as each one is experiencing very different outlooks.
In Dubai sale prices for villas in well located areas have increased by up to 16% in the last quarter with average prices up by between 6% and 8%. Apartment rents increased by 6% in the second quarter of 2012 compared to the previous quarter, and average villa rents increased by 9%.
‘After three years of declining rates and limited sales activity, the Dubai real estate market is on the way to recovery, with established quality communities showing increases in values and higher transaction volumes,’ said Elaine Jones, chief executive officer of Asteco.
Rental rates for apartments in Dubai Marina and Downtown Dubai increased 10% during the second quarter compared with the first, with the average two bedroom apartment going for around AED90,000 to AED120,000 per annum. Rents in well heeled districts such as Mirdiff and Arabian Ranches increased by 13% and 11% respectively.
‘Tenants are relocating in search of value for money. One and two bedroom apartments as well as three and four bedroom villas are the preferred unit types. In terms of rates, quality well managed developments, will continue to set the pace,’ explained Jones.
Property prices increased in Dubai Marina, the Palm Jumeirah and Downtown in the second quarter with villas on the Palm Jumeirah now the most expensive in the emirate at AED17,200 per square meter, said Asteco.
The cost of a one and two bedroom apartment in Downtown increased 9% compared to 8% for property in Dubai Marina and Palm Jumeirah. Villas in Emaar’s Arabian Ranches saw the largest increase with prices rising 16%.
‘Looking ahead to the 2012 year end, sales prices will continue to rise for quality developments, especially villas. The number of owner occupiers rose steadily in line with improved financed options offered by banks, which we expect to continue,’ said Jones.
But in Abu Dhabi residential rental rates dropped by as much as 15% in the second quarter of 2012 as 7,400 apartments and 1,675 villas were added to the city’s rapidly expanding real estate sector. ‘This has triggered a wave of internal movement as existing residents sought to upgrade to better quality and value for money accommodation,’ explained Jones.
As a result rental rates have slumped. The biggest drop was in Marina Square, which fell by 15% followed by apartment units in Mussafah and villas in Sas Al Nakhl, which both dropped by 14%. An additional 7,000 apartment units and 4,560 villas are due to come on stream in the second half of 2012, which will put further pressure on landlords and rental levels.
In the sales market, apartments in Shams Abu Dhabi, Marina Square and Raha Beach proved the most in demand, but the growing supply meant property prices also slumped in the second half of 2012. Most areas in Shams Abu Dhabi, Al Raha Beach and Marina Square saw prices decline by around 4%, averaging AED10,600 per square metre.
‘Investors have started to re-enter the market since rental return prospects have started to improve due to price reductions and more affordable mortgage options. But, sales prices are still depressed overall due to the amount of available supply and the number of distressed sellers still in the market. Increased transaction activity will continue in the second half of 2012 as more projects are handed over,’ added Jones.