The best rental deals in Dubai are currently available in International City, Discovery Gardens and Dubai Silicon Oasis as landlords there start to compete to rent their units, according to realty consultants.
Mohanad Alwadiya, Managing Director, Harbor Real Estate, says: “Over the past 21 months, the Dubai rental market has moved rapidly from being an expensive market to an affordable market. Nowadays, a tenant can get a lot closer to true value, particularly with the ‘new-found’ willingness of landlords to negotiate. Landlords are actually competing to rent their properties.”
Consultants say Dubai offers a greater range of choice and tenants can succeed in obtaining excellent bargains without having to compromise on quality or lifestyle.
Elaine Jones, CEO, Asteco Property Management, says the cheapest rentals are currently available in International City, International Media Production Zone, Discovery Gardens and Deira.
As for Saadallah Al Abed, Colliers International’s Senior Consultant-Research & Advisory, the lowest rentals are in the International City, Discovery Gardens, Dubai Silicon Oasis and Al Nahda area, while Kim Robinson, Residential Sales and Leasing Manager for Cluttons Middle East, puts Discovery Gardens, International City, Jumeirah Lake Towers and Mirdif on her list.
Omer Ghani, Chief Executive Officer, Fine and Country, finds communities such as Jumeirah Lake Towers, Discovery Gardens, Dubai Silicon Oasis and International City offering the most economical properties.
According to Colliers estimate, average rental rates have declined by 25 per cent between Q2 2009 and Q1 2010. As per Harbor’s calculations, International City rents are 20 per cent lower than Q4 2009 and eight per cent lower than Q1 2010; Discovery Gardens rents are 13 per cent lower than Q4 2009 and eight per cent lower than Q1 2010, while rents in Dubai Silicon Oasis are five per cent lower than Q4 2009, but remain stable compared to Q1 2010.
Robinson points to a one-bedroom apartment being leased in December 2009 in Discovery Gardens for Dh57,000, which came down to Dh50,000 in March 2010 and is available for Dh40,000 in May.
However, a studio apartment in International City, leased for Dh30,000 in December 2009, declined to Dh22,000 in March 2010 and is being still leased for the same rate.
Colliers expects 17,000 units of affordable housings to enter the market this year, while Cluttons Middle East estimates around 10,000 units will be added in the affordable housing segments during the same period.
Asked if rents will continue declining in the coming months, Jones says: “In some developments we have seen some stabilisation and in some cases marginal increases in rental rates. Many of these developments are, however, in established communities where retail, access and services are set up. Developments where access, retail and services are limited, we expect rental rates to decline, particularly where new supply is being released onto the market. Consequently, properties in established areas that do not add value will experience tenants moving to properties with good quality services and properly managed buildings.”
Alwadiya anticipates a slow and marginal decline, which will be largely influenced by the pace and volume of the new supply that will materialise during the next few months.
“By the end of 2010, we expect the rents in some affordable projects to decrease by an average of seven to eight per cent. We also predict a trend of internal immigration from older projects to newer and better projects. The soon-to-be handed over SkyCourts project, which is located strategically within DubaiLand, has significant potential given its appeal to the middle-income earner and the rich lifestyle it offers.”
According to Al Abed, given the amount of supply entering this year, Colliers expects a further softening of rental rates. However, Robinson is unclear whether rents will decline further in the coming months.
“What we can say is that there will certainly be more choice as people leave once the schools finish, although it may be more a case of flexibility than rent reduction. So, for example, clients will negotiate for more cheque payments or they may request the garden be landscaped. We may have an indication how many families will be leaving Dubai this summer by simply talking to removal companies. However, we can only speculate how many new families will be relocating to Dubai towards the end of the summer,” she adds.
Ghani believes a downward pressure is expected due to new inventory coming to the market, but recent population statistics, issuance of new licences and reports from recruitment firms indicate inward immigration might be stabilising, which may provide the demand necessary to start absorbing a portion of the inventory reaching the market.
“Should this trend happen, price declines in rental values may be muted,” he says.
All the consultants admit that landlords and agents have started offering special incentives to lure tenants.
Alwadiya says: “Landlords, particularly those who are financially exposed, have become very nervous and hence more flexible. We are seeing more landlords accepting multiple cheques and in some cases offering a month or two free of charge. On the other hand, some agents are trying to attract customers by lowering their commission rates. This increased landlord nervousness will only contribute to the downward spiral. Good news for tenants, particularly those who are taking advantage of the distress rates that started to appear.”
Landlords are becoming more flexible in terms of payment terms by offering an increased number of cheques as well as rent-free periods, Jones says. Other incentives include paying the agent fees, part of the bills and further reduction in rent if the tenant is willing to sign lease agreement of two years plus, she adds.
Al Abed says landlords are offering a 12-month payment term to tenants with rent-free period and providing utilities, such as water and electricity, free of charge. Robinson adds that landlords are flexible even on maintenance arrangements, while Ghani points to landlords becoming flexible on security deposit terms.
Alwadiya says: “The willingness for landlords to negotiate has reached an all-time high as those, who wish to retain some premium, realise it is futile due to the excess and increase of supply. Landlords are re-evaluating their positions quickly.”
By: Parag Deulgaonkar, Emirates Business 24 7