Investment Property in Dubai – Rents fall again

Property investors are continuing to take a bath in Dubai as rents fell once again in August. According to a survey by the Khajeel Times and property management firm Asteco. Some of the more upmarket developments are beginning to stabilize, but with the outflux of ex-pats during the summer, falling property prices and a serious over-supply in most markets, rental prices continued their decline, and in many instances, renters are simply choosing to walk away from a new lease. The requirements in Dubai are a little different in that Islamic law does not allow for credit and renters are often required to pay a full years rent in the form of 4 post-dated cheques. This is an excerpt from the report.

“Average annual rents for cheaper studio apartments in International City, Discovery Gardens, Jumeirah Lake Towers, Deira and Dubai Marina were unchanged at Dh28,000, but more expensive studios in these neighbourhoods fell to Dh45,000 from Dh50,000 in July. Smaller two-bedroom units and larger two-bedroom flats in these areas were unchanged at Dh60,000 and Dh85,000, respectively.

The average rent in these areas for a three-bedroom flat varied from Dh90,000 to Dh110,000 in August compared to a range of Dh90,000 to Dh130,000 in July. Rents for studios and one-bedroom flats in the mid-tier neighbourhoods of Bur Dubai, Al Barsha, Greens and Jumeirah Beach Residence averaged Dh35,000 to Dh50,000 in August, down from July’s range of Dh40,000 to Dh60,000. Rents for smaller two-bedroom units fell to Dh75,000 from Dh85,000, while those for bigger units dropped to Dh100,000 from Dh120,000.

For three-bedroom flats in these mid-tier locations, average rents ranged from Dh95,000 to Dh120,000, significantly lower than July’s range of Dh120,000 to Dh140,000, the survey showed.

In the upscale neighbourhoods of Marina Promenade, Downtown Burj Dubai, Emaar Six Towers, Palm Jumeirah, Shaikh Zayed Road and World Trade Centre, studio rents fell by an average of Dh5,000 in August and ranged from Dh50,000 to Dh60,000. A one-bedroom unit in these places ranged from Dh85,000 to Dh120,000 compared to July’s level of Dh90,000 to Dh130,000. Rent for a smaller two-bedroom flat was unchanged at Dh120,000, but rents for bigger two-bedroom flats slipped to Dh210,000, down by Dh10,000 on average from July.  “Rents have only stabilised in the most sought-after developments, which offer higher quality, better location and amenities like retail components and other leisure facilities,” said Ahmad Saidali, head of investment in Dubai for property consultancy CB Richard Ellis (Middle East)..

“But one should also consider the holding capacity of some owners, who instead of accepting slightly lower market rents, will instead choose to leave properties vacant for an extended period of time in the hope of achieving their expectation of rental value. In some cases, this has created a short-term supply distortion, with some prime districts seeing availability of units virtually dry up,” he told Khaleej Times.

The ongoing financial crisis continues to distort the markets around the world. In many cases the amount of property being with held from the market by the banks actually outweighs the amount of property freely on the market. The banks and governments in Dubai, the USA and Spain are now the largest property owners in those countries and most of it is sitting rotting.