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Dubai housing rents set to face pressure

DUBAI, May 6, 2015

The residential rents in Dubai, UAE, have stablised over the first three months, and are now likely to face pressure with a flood of new supply coming to the market in the months ahead, said a report.

While the first quarter saw 2,000 new apartments and villas added to the market, the delivery pipeline for the rest of the year is an estimated 19,400 units, which will weigh on rental prices and sales and encourage developers to target more affordable properties, stated a report by MPM Properties, the real estate advisory unit of Abu Dhabi Islamic Bank (ADIB).

The average apartment rents in Dubai rose one per cent quarter-on-quarter, and five per cent year-on-year. Rents for villas meanwhile fell by five per cent in the first quarter in some developments, the report said.

Residential sale prices broadly declined quarter-on-quarter, though they remain generally positive on a year-on-year basis. Along with the abundance of new supply, attractive mortgage rates and payment plans will contribute to what is becoming a buyer’s market, it added.

“The amount of new projects in the Dubai market means properties will increasingly need to appeal to potential buyers’ sense of value,” said Paul Maisfield, the chief executive of MPM Properties.

“That means a shift towards more affordable properties, particularly close to the Expo 2020 site, and an emphasis on incentives and unique selling points, especially in the luxury segment. We expect buyers to benefit from these trends,” he noted.

According to him, the office segment had a strong start to the year, with average grade-A rents gaining over 15 per cent year-on-year and occupancy rates improving.

"This is a positive sign for the market, pointing to a limited impact from lower oil prices, and the emergence of new commercial hubs such as Barsha and Tecom will continue as the government takes further steps to attract entrepreneurs and improve the ease of doing business," stated Maisfield.

On the retail scenario, he said, the prime space in Dubai remains in high demand, with a growth of up to 10 per cent during the first quarter.

The sector should remain robust with various initiatives to increase tourist numbers and the continuing development of convenience, community and strip retail proving popular with local residents, he noted.

On the hospitality sector, Maisfield said an increase in five-star room supply and a drop in Russian tourist numbers took a toll on the hotel sector in early 2015, with revenue per average room (RevPAR) declining nine per cent in the first quarter compared to the same period last year.

However with the government focusing on expanding into new segments such as Islamic and film tourism and Chinese tourist numbers growing significantly, the outlook is positive for the short to medium term, he added.-TradeArabia News Service




Tags: Dubai | pressure |

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