After nine months of declines, asking rentals in Dubai stabilized in November 2009 and recorded strong gains in February 2010, up 6 percent sequentially, while rental yields expanded to 6.5 percent, the highest in almost a year, the brokerage said.
Since rentals, unlike prices, are a pure reflection of demand/supply dynamics, the turnaround in November 2009 suggests the market is reaching equilibrium despite additional supply coming in, it added.
Property firms in Dubai were hit hard by the global downturn, which sent prices in the emirate's once-booming real estate sector tumbling some 50 percent from their peak in 2008.
"Rentals in Dubai were helped by the spillover from neighboring emirates (particularly Abu Dhabi), which anecdotal evidence suggests gained momentum last year," HC said.
Stronger economic growth in the UAE this year and an expected recovery in the global economy are likely to further support demand, it said.
The brokerage named Aldar Properties as its preferred play in the sector, and said the emirate's largest developer by market value was likely to outperform as a 9.1 billion dirham asset sale to the government has not been fully discounted by the market.
The cash injection will provide the company with much-needed liquidity over the medium term and improve its liquidity profile, HC said, estimating that Aldar's net debt/equity ratio would drop to 72 percent from 115 percent after receiving the payment.
Shares of Aldar were down 0.25 percent at 4.05 dirhams by 0645 GMT.
