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Sharjah ..... strong tenant demand continues to outstrip supply.

Sharjah residential rents soar 26pc in Q3

SHARJAH, November 26, 2014

The residential rental values in Sharjah, UAE, surged 26.4 per cent in the third quarter compared to the same period last year largely driven by the reverse migration from neighbouring Dubai emirate.

The rents grew 5.3 per cent compared to the previous quarter as strong tenant demand continues to outstrip available supply, according to property expert Cluttons.  

The latest increase follows the 5.7 per cent rise recorded during the second quarter and translates into a 23 per cent surge during the first nine months of 2014, it stated.

Apartments retained their lead over villas, with rents rising by 35 per cent in the 12 months to the end of third quarter. The strength of tenant demand has persisted throughout the year against a backdrop of static residential supply.

Furthermore, with tenants wary of the lack of alternative options in the market, many households are choosing to remain in situ at renewal, capitalising on the security offered by the three-year Sharjah Municipality “rent-cap”.

While reverse migration from Dubai has no doubt fuelled overall tenant demand, requirements from Sharjah’s rapidly expanding Air Arabia has put pressure on the limited supply of villas, particularly at the higher end of the market.

Furthermore, with the strong growth in Dubai’s hospitality and food and beverage (F&B) sectors, several businesses have singled out Sharjah as an affordable alternative to Dubai for bulk staff housing.

This will inevitably catalyse increased competition for the city’s restricted apartment stock, particularly in the near term.

According to Cluttons, the market buoyancy is creating ample opportunities for landlords in Sharjah.

The strength of tenant demand continues to outstrip available supply, fuelling the strong rental value growth recorded across the city, it stated.

While there has undoubtedly been a sharp increase in the number of project starts, the expanding supply pipeline will not be delivered to the market in the near term, said the expert.

Securing utility connections through Sharjah Electricity and Water Authority (Sewa) remains a barrier and may artificially hold back fresh stock, it added.

In the interim, this creates an opportunity for landlords of centrally-located buildings to undertake refurbishment programmes in order to enhance their returns.

Cluttons said it had for instance, recorded a 45 to 55 per cent uplift in rents following the extensive three-year renovation works carried out at the United Arab Bank buildings. The three towers, which house 192 units, were subject to an extensive Dh6 million ($1.6 million) refit, which also included general structural reinforcement.

Although the towers were gradually phased back on to the market, they were leased rapidly and are now fully occupied. This compares to a 80 per cent vacancy rate prior to the refurbishment, the report added.

During the first three quarters of 2014, villa rents climbed by 29 per cent, with the rate of rent acceleration slowing to just under seven per cent in the third quarter, from 8.2 per cent in the second quarter.

This is not a reflection of weakness in the level of requirements, but instead points to a breaching of affordability. Clearly average household incomes have failed to match the speed of growth in rents, the real estate expert pointed out.

"Overall, the behaviour of the lettings market in Sharjah mirrors what has already occurred in the lettings markets in both Abu Dhabi and Dubai and we expect this to persist as affordability issues start to limit the strong rental value growth we have recorded over the past 18 months,"said a spokesman of Cluttons.

In response to the growing demand in the market and in a first for Sharjah, the newly-formed Tilal Properties has released residential and commercial land plots in its new master planned community on the Airport Road.

The landmark community will for the first time allow non-Arab nationals to purchase land in the emirate. We are already recording exceptionally strong demand from the investment community in the UAE, he stated.

Tilal City will also be anchored by a large shopping centre and will offer residents access to community schools, clinics and mosques.

Residential and commercial land plots, which will have all infrastructure in place, are priced starting from Dh10 ($2.7) per sq ft for villa plots and rise to Dh180 ($49) per sq ft for residential and commercial building plots.

As the government continues to ease restrictions on foreign ownership, developers are increasingly turning their attention to gated communities in an effort to match the developments seen in suburban Dubai, said the Cluttons spokesman.

The emergence of such freehold schemes will pave the way for investors looking to enter a market where average home values are roughly two-thirds lower than that of Dubai.

However, without a proven track record, development financing is likely to remain challenging, at least in the near term, said the expert.

While the current proposed 20 per cent ceiling on the volume of sales to non-Arabs per scheme will help to curtail the exponential growth seen in Dubai and Abu Dhabi, it will also limit the market’s exposure to an extent as this ruling is likely to translate into a slow, but steady rate of deals, he added.-TradeArabia News Service




Tags: Sharjah | rents | residential |

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