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Huge drops in apartment rents |
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Thursday July 16 2009
Average rents for apartments in Dubai declined by 16 to 26 per cent in
the second quarter compared to the first quarter, while office rents
fell on an average by 20 per cent during the same period, said a new
report.
Studios saw the maximum decline of 26 per cent with
average rentals coming down to Dh45,500 from Dh61,500 in the first
quarter. During the same period, one bedroom rents fell 16.13 per cent
to Dh78,000 from Dh93,000; two-bedroom rentals fell 18.94 per cent to
Dh107,000 from Dh132,000; while three-bedroom rents dropped 19.19 per
cent to Dh149,500 from Dh185,000, Asteco said in its second-quarter
report on Dubai property market.
"As rental rates continue to
decline, residents are moving from older buildings in less desirable
locations to quality units in New Dubai, such as Dubai Marina, Jumeirah
Beach Residence and Discovery Gardens. This is particularly the case
where single occupants and small families are concerned, as the moving
costs are lower, and they are usually more flexible than larger
families."
Average rents for villas were Dh119,000 for
two-bedrooms; Dh176,500 for three-bedrooms; Dh233,750 for four
bedrooms; and Dh277,000 for five bedrooms.
New Dubai reported a
lower fall in values as many buyers and tenants seek quality
residential units in completed community projects. As a result, prices
in developments such as Downtown Burj Dubai, Dubai Marina and Emirates
Living are seeing early signs of stability. With the increasing number
of projects being handed over, owners are reluctant to sell at a
reduced cost and are, therefore, leasing their units or moving into
their own units to save up on rents.
Andrew Chambers, Managing
Director, Asteco, said: "Those working in Abu Dhabi are increasingly
exploring residential units in New Dubai due to its proximity to the
UAE capital. While tenants are seeking units in community developments,
demand has mostly been for one- and two-bedroom apartments and for
three- and four-bedroom townhouses."
Established communities
such as Jumeirah Beach Residences (JBR), Downtown Burj Dubai and
Springs have seen the most enquiries from tenants and consequently, the
rents in these neighbourhoods have been least affected by the decline.
Average
sales prices of apartment and villa decreased by 15 and 13 per cent,
respectively, representing a significant slowdown in negative growth
compared to the quarter-on-quarter decline from the fourth quarter of
2008 to the first quarter of 2009. Apartment sale prices declined from
an average of Dh1,000 per square foot to Dh900 per sqft; whereas villa
prices dropped from Dh1,130 per sqft to Dh980 per sqft.
Enquiries
and transactions have increased over the last three months, with buyers
primarily seeking units in well-established and well-located
developments with complete infrastructure and community facilities. The
market is driven by end-users and long-term investors who are motivated
by value maximisation, namely the best price for a high-quality home in
a completed community. As a result, prices in developments such as
Downtown Burj Dubai, Dubai Marina and Emirates Living are showing early
signs of stabilisation.
As property prices see stability and
financing restrictions relax, Palm Jumeirah reported a surge in sale
prices for villas and apartments by 20 per cent and seven per cent,
respectively, in the second quarter. However, rents on the development
declined by 12 per cent and 25 per cent for apartments and villas.
Companies
looking for premium office spaces in Q2 gained an upper hand with sale
prices for offices declining by 24 per cent over the corresponding
period. Most office property owners preferred to hold on to their
completed assets rather than selling them, to benefit from a long-term
rental income stream.
Sales prices for offices decreased from
Dh1,550 per sqft on an average to Dh1,120. The biggest sales prices
decreases were seen in Downtown Burj Dubai (37 per cent) and Dubai
Sports City (60 per cent); while marginal drops were reported in Dubai
Marina, Downtown Jebel Ali and Dubai Silicon Oasis.
The
downturn also caused commercial rents to decline by an average 20 per
cent. Sheikh Zayed remained the least affected with many offices moving
to the area from less desirable locations in the face of falling rents.
Asteco anticipates prices of office spaces on this stretch to pick up
in the coming months with the scheduled beginning of the Metro services
in September.
Landlords have yet to adapt to the current climate
and offer incentives such as parking spaces and rent-free periods at
the beginning of leases, although some are offering flexible payment
plans, the report added.
Emirates Business 24/7
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