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Is rent about to drop in Dubai?

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The last 12 months have seen a near 15-percent fall in real estate prices in some parts of Dubai. It’s causing a lot of speculation about rents… Will they come down? And if so, when? Here, we take care of some of your questions.

So, the mini-blip has turned into something more serious?
You’d have to say it is now more than a blip, that’s for sure. According to Knight Frank, Dubai experienced the fastest falls in real estate prices of any area in the world this year.

What kind of numbers are we talking about here?
Depends where you mean by “here”, really. Sticking with Dubai, there was a year-on-year drop in house prices in August of 10 percent. Consultancy JLL said that they are revising their figures to reflect a fall in 2015 of around 15 percent, others are suggesting it might be nearer 20. Abu Dhabi is less soft, with only a three percent decline.

What’s all this down to?
A combination of factors, some benign – around 15,000 new residential units have come on to the market in 2015, which will always suppress demand – and some less so. Financial ratings agency Standard & Poor’s have pointed to a weakening of investor sentiment associated with a decline in oil prices and certain currencies. Then there are the cooling measures such as mortgage caps taking effect.

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Okay, but it can’t be all units in all areas. Any specifics?
A report by Phidar Advisory said the softest segment is perhaps the one most of us live in: villas and apartments with current annual rents of between AED100,000 to AED160,00. They suggested that this segment could be over-supplied by up to 40 percent in five years. The “low income” sector, rents below AED70,000 per year, is still vastly undersupplied.

When will we see our rents come down, then?
It will be less a case of a reduction than a freeze, to be honest. Rents have stabilised already with prices likely to flatten for the next 18 months. Realtors CBRE are talking about two and three percent falls in Downtown.Which is effectively zero.

What’s the forecast for next year? 
Mixed. There are another 19,000 units due for completion, so that should keep things cool. But then real estate website Bayut said the falls are exaggerated. Ultimately, your rent should stay the same.

Quite underwhelming news then, really.

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