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Further drop in rents
A further fall in rents in Dubai's residential sector is imminent, agree most property agents in the emirate, although opinion is divided on the extent by which rents are likely to fall across the sector by year-end.
"From the time after Eid until the end of the first quarter of 2010, depending on the location and development, there is room for 'significant' rental price reduction. There is a strong likelihood prices will continue to drop between 20 per cent and 40 per cent," Robert MacNair, Managing Director, Elysian Real Estate, told Emirates Business. "There is a clear rental price variation between buildings in the same development. For example, two towers at the Jumeirah Lake Towers' (JLT) – Icon and Green Lake – are priced widely apart. We currently have a one-bedroom apartment in Icon Tower going for Dh50,000 per annum and a one-bedroom apartment in the Green Lake going for Dh85,000 per annum. The rents will have to level up downwards."
MacNair said more than 4,000 to 5,000 units are likely to be handed over from now until the year-end and more are to be handed over from the year-end until the end of the first quarter of 2010.
"We are likely to have an over-supply situation. To get the best indication of this, take an evening drive through the Marina, West Marina and JLT and see how few lights are lit in these buildings. The good thing is that sales prices, on the other hand, are likely to start leveling from the first quarter of 2010 onwards with a little price increases in some areas due to location and the finish of the development."
Rosaleen Twyford, Branch Manager, Sherwoods Property Consultants, said: "It would be safe to say that tenants looking at moving in the next six months should be able to benefit from a five to 10 per cent drop in rents due to more properties coming to completion.
"Areas such as Dubai Marina, JLT and Jumeirah Beach Residence (JBR) may see a drop of five per cent in rents depending on the location of the development and its finish."
However, not all property agents are of the view that rents will dive further. Some, such as Larissa Vitvitskaya, Business Development Manager at Clifton Real Estate Consultants, said rents were unlikely to drop any more.
"I am not expecting any major rental drop as I am not expecting much handover to happen after Eid or by end of the year. We think rents have not fallen in the past few months; they have levelled. Enquiries and viewings have increased in the last four to five months. Obviously, people are keen to move in. From a sales perspective, I don't think prices are going up in a major way, but seeing prices not falling is in itself a big improvement," she said.
And for Muhammad Avais Najam, Managing Director of Venture Horizon Real Estate Brokers, the real estate market in Dubai seems to be taking a happily different turn, with rents and even sales prices showing some signs of recovery in certain areas.
"The high-end villas in Jumeirah Islands were renting for Dh250,000 a year in the first quarter of this year. Now the rate is Dh300,000 and there is no availability. We continue to witness extremely strong and healthy rental demand and this, to me, is a positive sign."
He said it is too presumptuous to say that rents would fall further because of a large supply coming into the market. "The only large supply worth mentioning is the Executive Towers, which does not amount to a lot of residential properties in the market. Plus, rental demand has been going high for these units."
According to Better Homes' statistics, 11 projects are likely to be handed over in Dubai from now until the end of the first quarter of 2010. Emaar Properties is likely to hand over Burj Dubai by early December, while the Lofts and Ghadheer is due for completion in the same month. Executive Towers in Business Bay is starting hand-over and Victory Heights in Dubai Sports City will be delivered starting now until December-end. Apartments and villas in the Green Community West will be handed over by year-end, while the first and second phase of Jumeirah Park and Al Furjan by Nakheel will be delivered during the first and last quarters of 2010 respectively.
According to Sherwoods, Emaar's The Marina-Park Island is readying for handover along with townhouses in Jumeirah Village. Emaar has already commenced handover of three towers in The Downtown Burj Views.
Twyford said during pre-summer many buyers were either scared or sceptical to purchase properties, as the notion was property prices would decrease after Eid.
"However, when you look at the overall picture, sellers have already put their properties in the secondary market whether because they were faced with financial stresses or other reasons such as leaving the country. As a result, these have been sold and we are seeing a plateau in property prices now."
Sales prices in Dubai have been stable, with prices holding up in certain areas and in some cases even seeing a slight increase.
Laura Adams, Sales and Leasing Manager, Better Homes, said: "Most people were sure that the handover of the Tiara Residence and the Golden Mile on the Palm Jumeirah would have reduced the prices of the more well-established units such as Shoreline Apartments. This, however, was not the case; the shoreline is still holding its price from just a couple of months before the handover, though still at a reduced rate compared to last year. Prices have stayed stable since May. In Downtown, the demand is still high for properties although we have Burj Views already handed over, which is helping to keep prices stabilised."
Claire Collier, Manager, In:Style Real Estate, said: "Sales prices have stabilised in Dubai and while they may not increase dramatically after Eid, it is unlikely they will come down any further. We do not expect any drop in rents either. So far, August has been our busiest month for rental and sales enquiries."
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