The residental property market in Sharjah witnessed a three per cent drop in rental rates during the second quarter as the northern UAE emirate started feeling the effects of a reverse relocation trend to neighbouring Dubai, said a report.

Fearing further decline in rental rates, Sharjah has stepped up its awareness campaign on the emirate and its market potential, according to property expert Asteco in its latest Northern Emirates Q2 2015 real estate report.

Renewed confidence in the long-term potential of Sharjah’s residential sales market could gain momentum, with the imminent relaunch of land sales at the Shoumous Residential Complex, stated the expert.

Located on the Sharjah-Kalba Road, the project targets both GCC and Arab nationals, and was initially launched following the success of plot sales within the Tilal City master planned development.

"Sharjah’s sales market has opened up in recent months, however, except for land plots at Tilal City that were priced in line with market demand, few properties have actually been sold due to the high asking prices, which failed to match buyer expectations," remarked John Stevens, the managing director of Asteco.

"The lack of activity was further compounded by a wave of affordable project launches in neighbouring Dubai, which diverted prospective buyer interest," he noted.

“Where Sharjah is also losing out is that Dubai’s more established real estate market has more transparent pro-buyer legislation in place,” he added.

In its UAE Property Review – Q2 2015 Report – Asteco had reported a slow second quarter for the Northern Emirates with the residential leasing sector generally witnessing marginal declines with the exception of Umm Al Quwain and Fujairah where rental rates remained stable.

Another project currently under development with potential to enhance interest in Sharjah, is the 45,470-sq-m Al Noor Island. According to the Sharjah Investment & Development Authority (Shurooq), it is expected to be handed over at the end of 2015.

With a central butterfly design theme, the development will feature a natural butterfly habitat housing over 500 species, a 3,500-m walkway and floating bridge serving as an entrance to the island, a literature pavilion, children’s playground, and an egg-shaped art sculpture, said the report.

Asteco pointed out that the tourism and residential project was expected to boost awareness of the emirate and its market potential, which will potentially drive higher rates and popularity to central Sharjah areas, especially along the Corniche.

“The Northern Emirates real estate market closely follows the Dubai market, with a few months delay between recovery and periods of stabilisation, so new project announcements and the timetabled completion of developments such as Al Noor Island are vital elements in securing investor interest and confidence in the months to come,” noted Stevens.

For the landlords of Sharjah and the neighbouring emirate of Ajman, a three per cent quarter-on-quarter drop in residential rental rates was prompted by a rise in vacancy levels as new supply was handed over and the reverse relocation trend to Dubai, which has started to gain momentum, said Asteco in its report.

The report noted that enquiry levels were also lower compared with the previous quarter.

Tenants can currently rent a two-bedroom apartment on the Sharjah Corniche from Dh48,000 to 80,000 ($13,064 to $21,774) per annum or Dh32,000 to 40,000 ($8709 to $10,887) in Ajman.

Asteco reports that although residential rental rates declined in the second quarter, they were still higher in comparison with the previous year in the northern emirates of Fujairah, Ras Al Khaimah and Umm Al Quwain.

“Another reason for the decline in Ajman has been the handover of new supply in recent months. We've seen a large amount of new stock entering the market, at a time when newcomers to the city were fewer. This resulted in an internal movement, away from older buildings to newer properties, particularly one and two-bed units, as tenants upgrade,” explained Stevens.

According to Asteco, Ras Al Khaimah has been the Q2 2015 success story with established communities such as Al Hamra Village and Mina Al Arab, continuing to witness good levels of demand and high occupancy rates, especially for quality competitively-priced villas and townhouses.

“This prompted the launch of the second phase of Flamingo Villas by RAK Properties, following strong sales performance for phase one, where villas achieved just over Dh600 ($163) per sq ft; a similar price to that of a three-bedroom in Al Hamra with golf course view, which sell for Dh500-700 ($136 to $190) per sq ft,” remarked Stevens.

The phase one of Flamingo Villas is expected to be handed over in late 2015 with 57 two and three-bedroom units ready by the end of 2016, said the property expert in its report.

On the 2015 outlook, Asteco said it was a positive one for the office sector despite a commercial rental rate drop of three per cent this quarter, with the Business Confidence Index (BCI) showing a positive outlook for the remainder of 2015 according to the Sharjah Chamber of Commerce & Industry (SCCI).

The SCCI highlighted companies’ positive sentiment in Sharjah as firms plan to hire more employees, which may translate into improved demand for office space in popular areas such as Corniche, Al Nahda and Al Tawuun, the report added.-TradeArabia News Service