Dubai’s falling rental prices provide respite for expats escaping high prices in Abu Dhabi and lure back residents who fled to the northern emirates in search of cheaper accommodation last year, says expert
Abu Dhabi’s economic strength has come to Dubai’s aid at federal level, and the same has been happening, more discreetly, at residential level too. The UAE capital’s infrastructural development, shortage of supply and high prices have allowed more people live in ‘New Dubai’, much to Dubai’s commercial benefit, according to Mohammed Nimer, CEO of MAG Group Property Development.
“It’s a mirror image of what happened last year – initially Dubai’s rising rental prices forced expat residents out to Sharjah, Ajman and Ras Al Khaimah, but now the sharp fall in prices is luring them back,” said Nimer.
“These two distinct dynamics that have played out in separate Emirates, during different periods, have both ironically resulted in breathing life into Dubai’s residential market at a time when other areas of the UAE real estate market have been left gasping,” he added.
One-bedroom apartments in Jumeirah Lake Towers or Dubai Marina are now renting for around AED60,000-70,000, at least AED30,000 less than last year, so it’s little wonder that they’ve suddenly become a lot more appealing to pivotal mid-income budgets.
“It’s easy to forget, amid stagnant off plan sales, that the heartbeat of Dubai’s real estate industry, leasing sales, is still ticking,” said Nimer.
David Macadam, Director of Commercial Division, Better Homes, transacted 400 leases in Dubai in May, compared with between 200 and 300 per month in 2008. A third of these were new entries from the UK, Europe and the US, who were mostly mid-level managers, a third were from outlying emirates, and a third were residents who were shifting internally as district prices drop.
Perhaps most importantly, there are signs that residential sales are picking up, drawing in more genuine buyers and end users, rather than the care-free speculators of yesteryear.
The value of mortgages issued in Dubai topped AED8 billion during the second quarter compared with AED7 billion in the previous quarter, according to DubaiFocus, a product by Reidin.com in partnership with RERA and Dubai Land Department, which is an encouraging sign.
But nobody knows when mortgage companies such as Amlak and Tamweel will return to the market –together, they have 50% of the freehold property market tied up – and funding is the cornerstone of any real estate industry.
“Clearly we’re still in a global recession – and need to manage our expectations accordingly. The general picture will be a lot clearer after Ramadan – whether expatriates have indeed returned after the summer break, with their families, alone or not at all,” commented Nimer.
“In my opinion, Dubai and Abu Dhabi now have built up a momentum – albeit one that’s stuttered in recent months – but the ripple effect will be felt most acutely in the outlying Emirates,” he added.
“It’s no secret many projects in the Northern Emirates are being radically modified, due to investor worries and issues surrounding power supplies. Uncertainty also surrounds some other projects there – and neither can fall back on leases with any real confidence, with ‘negotiable’ rents in many areas of Dubai,” concluded Nimer.
