Where Dubai's rents rise fastest

Secondary and tertiary locations in Dubai, which until last year were witnessing a price and rent drop, are back in demand.

These areas, according to Jones Lang LaSalle (JLL), a property consultancy, are witnessing price and rent surge much faster than primary areas.

In its second quarter report on Dubai real estate market, JLL said: “The residential market is now experiencing a broad-based recovery, with prices and rental values picking up in the secondary and more affordable locations, while the primary areas are now witnessing slower growth.”

However, it adds that demand for projects in newly developed areas, has still not picked up and hence more time will be needed for growth.

Earlier this month, Asteco Property Management said rent rises in Dubai’s established communities is likely to force some tenants to move to more affordable communities.

“Residents will be priced out of established communities to more affordable, less developed areas due to the rent rises, with landlords controlling terms of rents and payment,” the property management company had said.

Citing the Reidin rent index, JLL says lease rates jumped by 12 per cent year-on-year (y-o-y) and three per cent quarter-on-quarter (q-o-q). The villa rent index rose by 13 per cent y-o-y, achieving its peak value in May 2013. The apartment rental index went up by 12 per cent y-o-y, but remains 24 per cent lower than in January 2009, the time when the index was started.

JLL says that following the rent rise, “some” tenants have started to consider moving to more affordable secondary locations, a move that has resulted in a slower rental growth in some well-established areas. No details were given on which established communities saw slower growth.

Best performing rental market

The latest Prime Global Rental Index report by Knight Frank, a UK-based consultancy, revealed annual rents in Dubai rose 18.3 per cent, with the emirate being the best performing rental market in the world. Rental values in Dubai rose 10.1 per cent in the last six months while it increased by 3.5 per cent in the first quarter of 2013.

Last week, National Bank of Abu Dhabi said average rents in Dubai rose by three per cent in June alone to Dh74.2 per square foot, taking the annual increase to 16.35 per cent.

Price up 3% q-o-q

The new report further added that the Reidin residential sale index rose by 16 per cent y-o-y and three per cent q-o-q. The apartment sector outperformed the villa market with the apartment sale price index jumping 17 per cent y-o-y and the villa sale price index rising 12 per cent y-o-y. However, both remain below their peak values with villas 17 per cent less than its peak and the apartment index 19 per cent less than in Q3 2008.

As of June, the total residential stock in areas monitored by JLL stood at around 360,000 units, with 3,400 residential units, mostly apartments, being handed over in the second quarter.

The main project completion of the last quarter was the Cayan Tower (Infinity Tower) in Dubai Marina, which added 456 units to the residential market.

18,600 new units expected

JLL expects 18,600 residential units to come to the market before year-end. As always, the consultancy says it is likely that much of this supply will not be delivered by its scheduled date as some developers, especially ones with projects in areas with a large upcoming supply, may remain reluctant to launch some of their units.

Moreover, nearly 38,000 additional residential units are expected to be added to the market by 2015. The largest proportion of future stock from 2013 to 2015 will be delivered in the submarkets of Dubailand (5,800 units); Dubai Sports City (4,000 units); Business Bay (3,600 units); Dubai Marina (2,800 units) and Jumeirah Village (2,500 units).
 

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