Dubai's Palm Jumeirah has seen rents drop over past year
It’s a competitive rental market in Dubai at the moment, with additional supply putting tenants in a strong negotiating position when looking for a new apartment. As a result, many areas have seen rents drop in the first quarter of 2017, and there’s one place in particular that seems to be decreasing.
Asteco’s Q1 2017 Dubai market report said that rents have dropped three percent this quarter and eight percent on the previous year. However, it seems that the most expensive areas have experienced the sharpest drop, with rents on the Palm Jumeirah going down seven percent this quarter and 14 percent over the last year.
John Stevens, managing director of Asteco explained that this decline is due to the number of new apartments coming onto the rental market.
“A combination of new supply and tenants taking advantage of competitive rates has resulted in landlords offering more flexible terms either by increasing the number of cheques or, in some instances, offering rent free periods,” he said. “This has been compounded by the addition of 3,600 apartments in Q1, which is expected to top 17,000 by the end of the year, thus putting further pressure on the rental market.”
A similar report by Core Savilles saw similar drops. David Godchaux, CEO of Core Savills explained that the reduction is partly due to lack of demand.
“Looking at the rental market, the total pool of tenants has decreased over the last 2 years due to macroeconomic employment deterrents while new occupier demand has not fully covered the gap,” he said. “Of this occupier demand, a segment of tenants who could afford to shift to ownership in the backdrop of relatively lower acquisition prices and higher yields, have done so - reducing the existing pool of renters even more., The market continues to bring new supply at unchanged pace from the past few years, adding downward pressure on rentals.”
The trend for villas is similar, dropping three percent in comparison to the first quarter of 2016 and eight percent annually.
And if you’re looking to move into a villa any time soon, there’s some good news. The Asteco report says that another 4,000 villas are scheduled for completion by the end of 2017, which is likely to push the rental value of villas down further.