Dubai Apartment Rents Stabilizing in Q4 as Tenants Move to Value

Dubai Apartment Rents Stabilizing in Q4 as Tenants Move to Value

Residential News » Residential Real Estate Edition | By Alma Kadragic | January 12, 2011 1:37 PM ET

(DUBAI, UAE) -- According to the latest report from Asteco, an increased supply of high quality, affordable apartments led to considerable tenant movement across Dubai in Q4 2010. In addition, apartment rental rates declined by just 3 percent during the same period, the lowest quarter-on-quarter fall of the year, an indication that the market may be stabilizing.

"The real estate market is characterized by a large supply of high quality stock at affordable rates, leading to a flight-to-quality trend currently seen across Dubai. Apartment rates have dropped 17 percent on average during 2010 and this has brought a number of upscale developments within the reach of mid-income budgets," said Elaine Jones, CEO, Asteco Property Management.

Although apartment rents fell 17 percent last year, that was still less than the 24 percent drop in 2009. According to the report, International City has seen the largest drop due to tenants migrating to better quality developments in more desirable locations. Overall studios experienced the lowest decline, and one-bedroom apartments suffered the largest fall."Rents are expected to continue their downward trend in 2011, albeit at a lower rate as more supply enters the market," added Jones.

Villa rental rates fared better than apartments in Q4 2010, falling by just 1 percent over the three month period, primarily due to the limited availability in central areas. Quality communities such as Palm Jumeirah and Jumeirah Islands performed better than more mature developments such as The Springs and The Meadows.

Apartment sales prices slipped by only 2 percent on average suggesting a slowdown in the rate of decline. Continuous delivery has seen average sales prices in Dubai drop to $232 over the past year, while prices in International City and Discovery Gardens have fallen to $95 and $123 per square foot respectively. Sales prices on Palm Jumeirah were flat in Q4 but command one of the highest prices at around $409 per square foot.

Villa sales prices in Q4 meanwhile were relatively stable with only the Springs experiencing a 4 percent fall. Overall market prices fell just 8 percent in 2010, with more downward pressure in developments with a large inventory such as The Springs and Arabian Ranches. Market demand continues for smaller units, driven by affordability.

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