Tenants Emerge as Winners as Residential Rents Stabilize in Sharjah

Tenants Emerge as Winners as Residential Rents Stabilize in Sharjah

Residential News » Sharjah Edition | By WPJ Staff | May 11, 2015 8:20 AM ET

According to Cluttons, the stabilization of rents across Sharjah's residential property market has resulted in rental costs remaining unchanged during Q1 2015, following a 23.9% increase in 2014.
Cluttons' Spring 2015 Sharjah Property Market Outlook Report shows that in Q4 2014 rental growth slipped to just to 0.5%, while in the first quarter of 2015, little or no growth in rents was recorded. Tenants who have been negotiating at renewal have found that the majority of landlords are increasingly nervous about void periods and are leaving rents unchanged. This follows an overall growth in rents of 23.9% over the course of 2014.
Steve Morgan, chief executive of Cluttons Middle East said: "There has also been a recent trickle of vacant units being returned to the market; something that has not been seen for a number of years. This is being driven by tenants being lured to Dubai once more as rents steady south of the border, as well as those moving further afield to Ajman, which is perceived to offer better value for money; particularly recently completed buildings."
Furthermore, with a growing awareness amongst tenants of their right not to have a rental uplift for three years under Sharjah Municipality rules, landlords are not willing to risk a loss of income by getting tied up in litigation on any irregular rent rises.
Morgan continued: "While the Municipality's system appears to be working for now, Sharjah may benefit from an official rent index, which would give the market a greater sense of freedom and would also encourage other investors to step in to the buy-to-let market. This would remove the constraint of income levels being effectively frozen for three years under current rules."
International research and business development manager at Cluttons, Faisal Durrani said: "While an official rent index would be welcomed by tenants, with widespread stability in rents taking hold, tenants are emerging as clear winners in the current residential market. The availability of alternative, competitively priced housing options not only in Sharjah, but Dubai and Ajman as well, means it is unlikely that we will see any strong turn around in the rate of rental growth in the short term, especially as the market's performance is very much hinged on how the surrounding emirates' real estate markets behave."
The Cluttons report indicates that there remains a handful of premium renters who are willing to pay higher rents to secure properties with perceived high quality finishing, views and facilities. In the Qasba Canal area for instance, 3-bedroom apartments let for between AED 110,000-115,000 per annum, considerably higher than the current three-bedroom average of AED 75,750 per annum across the rest of the city.
According to the report, investment activity remains robust with Sharjah's real estate market remaining a safe haven for refugee capital. At Tilal City for instance, where 1,800 mixed use plots went on sale at the end of last year, almost 70% of the plots in zones A and C have already been sold to investors. And while just under 50% of the buyers have been Emirati, Syrian buyers accounted for nearly 16% of total sales. The next biggest group of buyers were Pakistanis (8%), Palestinians (5%) and Kuwaities (5%); a very different make up to the transaction league table in neighboring Dubai.
Durrani commented, "For some time now the market has experienced a steady stream of 'refugee' capital flowing into Sharjah. This is primarily because the city's appeal to regional investors goes deeper than attractive pricing. Its strong cultural identity and ties to Islamic heritage and tradition have proved invaluable in allowing it to emerge almost unchallenged in the region as a more easily accessible market when compared to Abu Dhabi or Dubai as it is perceived to offer better value for money."

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