Rising expatriate population driving Dubai house rents higher

Fuelled by an increasing expatriate population and rising number of corporate tenants, prime residential rents in Dubai rose by 15 per cent in the year to June 2013, according to a new report.

Knight Frank, a UK-based consultancy, in its latest report, said rent increase would have been steep, but the government’s restrictions on landlords raising rents of their existing tenants has controlled the increase and possibly reduced the movement between properties.

Moreover, increasing demand has led to “good” rental returns with net yields of four to six per cent for investors.

In July, Knight Frank’s Prime Global Rental Index put Dubai on top of the list of best performing rental markets in the world.
Rents in the emirate rose by 18.3 per cent in the year to March and were up 10.1 per cent and 3.5 per cent in the last six months and the first quarter of 2013

.Dubai is a front-runner to host the World Expo 2020, which is likely to create 277,000 jobs between 2013 and 2021 with over 25 million visitors expected to attend the expo.

Price rise

Growing investor confidence has already led to price increases. The report states villas are witnessing a price appreciation of 11.4 per cent, while apartments have risen 15.1 per cent since beginning of 2013.

Investors from North Africa, the Middle East and Asia are looking to place their wealth in a safe-haven environment with Dubai topping their list.

Knight Frank’s Wealth Report 2013 had revealed Dubai as one of the most favoured ‘safe haven’ locations for global investors.

“There is a definite focus on quality by buyers, which is now recognised clearly by developers. With the resurgence of Dubai real estate has come a more acute awareness of trust, reputation and the ability of developers to deliver a high quality product,” the report said.

Buy before the cap

Although the majority of property transactions in Dubai are done in cash, Knight Frank said the proposed mortgage cap did cause a flurry of activity amongst owner-occupiers, who were keen to purchase homes before the cap is enforced.

Last year, the UAE Central Bank had proposed new maximum loan-to-value-ratio for mortgages in a move to stop the residential market from overheating. The new regulations are expected to come out before year-end.

“We now understand that any directives will not be fully implemented until later in the summer and until then the banks are continuing to lend according to their own criteria,” the report added.

 

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