Apartment rental prices in Dubai are continuing to fall, with the pace of decline increasing in the second quarter over the first quarter 2017, according to Asteco.
The consultancy, in its latest report, said rents softened 2 percent quarter-on-quarter, with the quarterly fall “extending previous declines”. On an annual basis, rents were down by seven percent.
The emirate, it said, is expected to receive 17,700 new units this year compared to 8,750 unit last year, as a number of these units will be offered on “discounted rates to encourage take-up”.
A 12-month period comparison revealed Downtown Dubai rents fell by six percent, while Jumeriah Beach Residence and the Greens both softened by four percent. Business Bay, Downtown Dubai, Deira and International City plunged by 14 percent, 12 percent, 11 percent and nine percent, respectively.
In the villa segment, rentals declined marginally in the second quarter across all communities except Mirdif and Al Barsha. Palm Jumeirah and Springs posted the biggest decline of four percent with the highest year-on-year drop registered in Springs (16 percent), Jumeirah (14 percent), Arabian Ranches (13 percent), Palm Jumeirah (13 percent), Al Barsha (12 percent), Mirdif (11 percent) and Umm Suqeim (10 percent).
“Market conditions have served to strengthen the negotiating position of many residential and commercial tenants. Many existing tenants have taken this opportunity to renegotiate their lease terms [on expiry of contracts], or when faced with intransigent landlords, opted to relocate in search of more attractive terms,” said John Stevens, Managing Director, Asteco.
“This has resulted in an increased churn of tenants. The second half 2017 will see the delivery of a significant number of new units/ floor space and we anticipate that this new supply will amplify current trends.”
Meanwhile, apartment sales prices recorded an average quarter-on-quarter decline of three percent due to rising number of affordable projects and developers offering smaller units at lower price points and greater post-completion payment options. The luxury segment fell by three percent, while mid-market segment declined by two percent.
Dwellings in Dubai International Financial Centre, Jumeirah Beach Residence, Palm Jumeirah, Business Bay and the Greens remained flat, while International City and Dubai Marina posted the highest sales price declines at seven percent. Rental declines were also registered in Jumeirah Village (six percent), Discovery Gardens (six percent) and Downtown (five percent).
Villa sales prices dropped by two percent on average in the second quarter. While prices in Arabian Ranches increased by 2 percent, Jumeirah Village fell by 6 percent, the Meadows by 4 percent and the Springs by 9 percent.
“Whilst recent off-plan sales launches have been underpinned by competitive price points and increasingly flexible payment plans, the secondary market, unsurprisingly, remained generally correlated to demand and supply fundamentals,” Stevens said.