Dubai residential rents stabilized for the first time in two years last quarter, according to real estate consultancy Cluttons, even as the imminent delivery of new rental stock is likely to further depress rates throughout the year.
Rental rates were unchanged for the first quarter of the year, Cluttons reported on Sunday, with 3.1 percent lower than the year-ago period. But rents are expected to fall by 5-7 percent over the remainder of the year, the consultancy forecast.
“We expect newly completed rental properties to command the attention of tenants, while older and more secondary property will register rent falls,” said Murray Strang, Head of Cluttons Dubai.
“This flight to quality phenomenon will likely result in the creation of a very distinctive two-tiered market. In the short-term, we expect rents to slip by up to 5-7% over the remainder of 2018.”
Sales values across the emirate’s residential market continued to slip in the first quarter, declining 2.5%, even as more affordable areas such as Discovery Gardens and International City were stable.
“One of the key factors that has likely contributed to the stability in values in Dubai’s more affordable residential areas is the distinct lack of new supply in these markets,” said Faisal Durrani, Head of Research at Cluttons.
“Affordability aside, We expect demand to remain firmly centered on new homes priced under 800 dirhams per square foot (psf) as affordability takes center stage in the market.”
Cluttons expects values to slip by up to 5 to 7 percent in 2018, with the decline persisting well into 2019, “catalyzed by the buoyancy of the supply pipeline.”
Office rents remained largely unchanged across the emirate, despite a 21 percent correction in upper limit rents in Bur Dubai. Such flat conditions are likely to continue through until the end of the year, Cluttons forecast, with free zone rates bucking the trend due to their desirability as submarkets.