September 15, 2009

Rents for apartments in Sharjah have fallen by 30 per cent over the past year, but prices are expected to level off over the next 12 months, say real estate agents.

"We have witnessed an average decrease of 30 per cent in apartment rents and an even greater reduction in villa rents, particularly in cases where rates had gone up over the previous couple of years," said Shane Breen, Deputy Manager, Sharjah Office of Cluttons.

"Rents in Sharjah, for now, appear to have plateaued and we predict that for those buildings offering well-managed, quality accommodation rents are likely to remain the same for the next 12 months. The price of a one-bedroom apartment was approximately Dh50,000 per annum during the peak last year. Currently, the same apartments are now being rented for as little as Dh30,000 per annum."

Parvees Gafur, Executive Vice-President, Sales, at Gowealthy, said: "Rents have dropped by more than 30 per cent during the past year from their peak. However, Sharjah still commands a certain rental value point and will not see drastic drop-downs from here on.

"In 2004-2005, before the property upswing, studios were available for between Dh10,000 and Dh20,000 per annum. One-bedroom apartments were in the region of Dh12,000 to Dh24,000 and two-bedroom apartments ranged from Dh18,000 to Dh50,000 per annum.

"At last year's peak rents ranged from Dh18,000 to Dh25,000 per annum for studios, Dh20,000 to Dh45,000 for one-bedroom and Dh36,000 to Dh80,000 for two-bedroom apartments.

"Currently, rents are 30 per cent lower than 2008 peak levels. Average rents for studios in Sharjah are Dh25,000 per annum depending on the location. Rents very much depend on the age of the building and the level of services provided. Tenants continue to prefer to move to newer buildings with better facilities as they are still willing to pay a premium for quality."

Asteco Property Management agreed that rents had dropped by about 30 per cent in the past nine months.

"The rental fall has affected studios, one- and two-bedroom apartments," said Khaldoun Kamal, Manager, Sales and Leasing, for Abu Dhabi and the Northern Emirates. "Rents in Al Mamzar are currently the highest."

In May, Emirates Business reported that residential rents in Sharjah had fallen by 19 per cent in the first quarter of 2009 compared to the fourth quarter of last year, with vacancy levels rising as tenants moved to affordable areas in Dubai.

Meanwhile, office rents dropped by nearly 34 per cent in the same period.

Kosta Giannopoulos, Sales and Leasing Manager of Better Homes, said: "There is a lot of movement in the rental market in Sharjah due to people upgrading to larger apartments because they are now more affordable. At the same time people are also downgrading to smaller apartments because of their financial situation. Sharjah is also witnessing people relocating to Dubai due to cheaper rents being available there."

Gowealthy , however, said Sharjah had more residential buildings available for rent than Dubai.

"In terms of the sheer number of residential buildings available for rental purposes, Sharjah outscores even Dubai," said Gafur.

The agents said Sharjah remained the preferred destination for low-cost rental living even though prices had dropped in Dubai.

"Sharjah continues to be a viable emirate for residents looking to continue renting although rates in Dubai are falling. This is because for a majority of expats living in the UAE, Sharjah will always be the residential location of choice because of low cost of living," said Gafur.

"Though there are many cases of Sharjah residents moving to Dubai, the influence of this on the rentals market in Sharjah is marginal at best. This is because the slowdown in the economy as a whole has meant lower incomes for many families, who still see Sharjah as more viable in spite of the reduction in Dubai rents."

Breen said: "The effects of the financial crisis on Sharjah's residential rental market have been slower to appear compared to Dubai. While a number of Sharjah residents have relocated to Dubai or further afield, for most people price is the clinching factor in why they choose to reside in Sharjah. Sharjah offers decent quality accommodation at rents that are appealing to the budget-conscious tenant.

"The changing rental market has allowed some Sharjah residents to take advantage of the decreasing rents by renegotiating their current leases or moving to larger, newer apartments or villas. Our managed properties have fared extremely well despite the unfavourable market conditions and we have been able to maintain a 100 per cent occupancy rate.

"The decrease in rents only really started to occur around February and March, by which time rents had already fallen significantly in Dubai and tenants were taking advantage of being able to afford to move."

Kamal said: "The rental market has witnessed good activity in Sharjah in the past 10 months due to a number of people seeking better apartments and better areas to live at cheaper rates.

"Sharjah has also seen an influx of people coming from other Northern Emirates, such as Ajman and Fujairah, who work in Dubai or Sharjah but lived in these emirates. People are trying to find cheaper and better accommodation in Sharjah."

Gowealthy said Sharjah was seeing more end-users opting to continue renting rather than buying property on a leasehold basis. The realty agent said only UAE and GCC nationals could buy property in Sharjah on a freehold basis.

Exceptions to the rule are granted with the approval of the Ruler of the emirate on conditions that he deems appropriate. Other nationalities are not generally permitted to own property, but the Ruler's approval may be obtained under some special circumstances.

However, foreigners can acquire a leasehold right, which can be registered at Sharjah Municipality, as long as the term of the lease is for a maximum of 25 years.

Gafur said: "Sharjah Municipality is creating several major real estate projects to meet the different needs of the emirate as a whole."

He cited a number of examples of sales prices in Sharjah, including studio apartments at Beach Tower 1 that are currently going for about Dh400,000.

"A two-bedroom apartment at Canal Star Tower currently costs about Dh450,000. Another two-bedroom option in the same building costs about Dh490,000, while a three-bedroom apartment there is about Dh820,000," he said.

"In Sharjah, a price range of Dh500 to Dh600 per square foot may attract a buyer's attention today in the current market."

Giannopoulos said: "The main problem in Sharjah in terms of delivering finished buildings is getting the electricity connected, not construction delays."

Gafur said some of the major projects under way in Sharjah included the redesigning of Al Ruq'a Al Hamra used car market, construction of multi-storey car parks in the Al Majaz, Abu Shagarah and Al Qassimia areas and the establishment of many new residential areas and other projects.

"On the residential front, announced projects in Sharjah include Nujoom Islands, Sharjah Marina, Sharjah Gate, Abbco Towers, Al Suwaidi Tower, Al Dana Tower and Emirates Industrial City," he added.

Source:  Business 24/7