Dubai's tenants at advantage over landlords in 2021 as rents almost halved

Real estate consultancy firm says tenants can expect flexibility in lease terms

  
Marina Blue Hour. Image used for illustrative purpose.

Marina Blue Hour. Image used for illustrative purpose.

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Tenants in Dubai will continue to be in a position to negotiate for lower rents this year as landlords vie for tenants in a market that is still reeling from the impact of the coronavirus pandemic, a new report suggests.

Data released this week by real estate consultancy CORE showed that rents for properties across Dubai have fallen at a faster pace compared to sales prices, dropping by up to nearly 50 percent over the last six years.

From peak rents witnessed in 2014, residential units in apartment districts fell more than 40 percent, with many areas showing reductions over the 45 percent mark, according to CORE. Rents for villas have also fallen nearly 33 percent since 2014 peak levels.

"Most landlords are willing to negotiate lower rents and flexible lease terms upon renewals to retain tenants," Prathyusha Gurrapu, head of research and advisory at CORE, told Zawya. 

"Mostly, landlords are providing longer rent-free periods, higher number of cheques and lower headline rents to attract or retain tenants," Gurrapu added.

In its report, CORE noted that landlords in apartment districts are particularly willing to negotiate to keep their units occupied. “With household incomes expected to remain under pressure, we foresee most tenants remaining price sensitive,” it said.

However, Gurrapu pointed out that rental drops this year will vary across districts, citing that a few established villa communities could see some resilience, following last year's uptake and current limited supply.

On the other hand, most apartment districts have some room for further contraction. As the market remains price sensitive, flexibility in lease and payment terms are expected to continue," Gurrapu continued. 

Latest rental prices

Tenants who are looking to move houses today can expect to pay around 32,500 ($8,800) to 50,000 UAE dirhams for a one-bedroom apartment in Discovery Gardens, based on the Q3 2020 figures, the latest available compiled data, released by Asteco. In International City, the rates for similar units are cheaper, at 20,000 to 32,500 dirhams.

Asteco estimated that Q3 2020 average rents for apartments have fallen by 43 percent since their Q2 2014 peak levels.

Rental values in Dubai had been on a decline prior to the coronavirus crisis. The downward trend was largely due to a huge supply glut in the market. 

Where rents have fallen most

Looking at year-on-year data, rents have fallen the most in Dubailand, which recorded a 19 percent decline last year, according to CORE.

The Greens and The Views are also among the weakest-performing markets, posting declines of 17 percent and 15 percent, respectively, followed by Reem-Mira and The Villa in Dubailand, both down 11 percent.

Outlook

ValuStrat projected that the market is expected to see an uptick this year, especially with the hosting of the World Expo and positive developments around COVID-19.

“Subject to health crisis being resolved, the economy is expected to improve wand with Dubai Expo and the 50-year anniversary of the UAE, market sentiment is expected to pick up and could head towards bottoming out during 2021,” ValuStrat said.

CORE said there are still oversupply concerns hanging over the property market, although developers have cut back on new project launches.

“While oversupply concerns persist in the near term with ample new supply and unabsorbed inventory, new launches were at the lowest level in 2020 compared to the last eight years. We expect new launch volumes to further reduce in 2021 as developers re-strategize and focus on absorption of existing inventory,” said CORE.

(Reporting by Cleofe Maceda; editing by Seban Scaria)

Cleofe.maceda@refinitiv.com

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© ZAWYA 2021

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