Landlords in Dubai keep sweetening rental offers
(7/11/2018 7:34:00 AM)
Thinking of buying or renting a home right now in Dubai? Based on 2018 second-quarter transaction data, the answer will not be an easy one for residents to make.
Another 3,200 homes were delivered in the second quarter on top of the estimated 3,800 units completed in the first three months. And the new supply continues to have an impact on property values... and rents.
“Rent declines are expected to continue during the second-half, with new handovers planned in both freehold and leasehold communities,” states Cavendish Maxwell in its latest Dubai residential market report.
Given this kind of pressure on rents, landlords will continue offering flexible payment schemes and rent-free stays, and if not, even opt to cut their rates for existing tenants. As such, it’s not easy being a landlord these days. Operating expenses have continued to rise and net realised yields have [been] compressed in the majority of the locations during the last 12 months,” the report adds.
The decline has hit affordable, mid- and upper-tier communities alike. International City and Discovery Gardens, The Greens and Al Furjan have averaged drops of more than 6 per cent in the last 12 months. Al Furjan has seen a significant increase in new stock, with Azizi converting five of its buildings from serviced units to residences.
“For the remainder of the year, the majority of the upcoming supply is concentrated in Business Bay, Jumeirah Village Circle and Downtown,” the report says. “Approximately 52 per cent of the upcoming supply [is] expected to be handed over during Q3 18 [the third quarter of 2018]. “Increasing handovers will continue to impact rents in most locations across Dubai as tenants have more choice. This will also impact occupancies in existing [properties].”
For the entire year, expectations are for about 20,000 new homes to be ready. According to a survey, the majority of estate agents see a further drop in villa and apartment prices — by up to 5 per cent in the third quarter, with rents falling by a similar margin.
So, is it a good time to consider buying than rent? More so, as new supply continues to hold prices in check. “For the moment, some buyers continue to wait on the sidelines as further price declines are expected in the majority of the communities during the second-half,” the report states.
Based on 2018 second-quarter sales numbers, transactions have averaged Dh1.3 million, down from the Dh1.8-2.2 million that dominated the charts last year. It could mean that more end users are starting to get in now, possibly trying to lock in mortgage rates before they firm up further. “In Q2-18 [the second quarter of 2018] sales prices across the residential market registered quarterly declines of 1.1 per cent for villas/town houses and apartments,” the report finds.
“Buyers continue to be spoilt for choice in the off-plan market, thus forcing developers to offer special incentives such as aggressive payment plans, fee waivers, etc, to differentiate their projects.
“Secondary market activity remains concentrated in buildings/communities where investors are expecting relatively stable yields and end users are replacing rental outflows with mortgage payments.”
Developers are also getting more strategic in their campaigns — rather than just focus on prices and post-payment plans, they are offering potential buyers a long-term perspective.
Damac, for instance, is offering villas at one of its master-developments at just over Dh2 million — but with a cap on increases in service charges for 10 years.
Dubai Properties is pitching its villas — the ‘Villanova’ in Dubailand — at Dh1.3 million plus, a price that hits the sweet spot among buyers still deciding between an apartment and a villa.
The race is on — for tenants and buyers — in Dubai’s property market. And it’s one race with no immediate finish line.