Dubai rents holding steady in sign of uptick

Dubai’s real estate market held steady for a fourth consecutive quarter in a sign the Gulf’s worst-performing property sector is showing signs of recovery, said real estate consultancy Asteco. Rental rates for apartments in prime and midmarket locations stabilised in the fourth quarter, with Nakheel’s International City the only project to see a small slide in lease rates. “Transactions levels are rising as job security and increased market confidence results in people seeking tenancy upgrades and home ownership,” said Elaine Jones, CEO of Asteco. The company has seen “an increased number of new people relocating to the emirate as a result of the general life in business performance,” Jones said. The consultancy also saw increased interest from buyers in other Arab countries seeking safe haven investments amid the region’s political upheaval. The average rental cost for one and two-bedroom apartments in Dubai Marina were AED62,500 and AED80,000 in the fourth quarter, unchanged from the previous three-month period. On Dubai’s Palm Jumeirah, a year’s lease for a one-bedroom apartment was unchanged from the previous quarter at AED90,000, said Asteco. In Nakheel’s International City, annual rents fell to AED23,000 for a one-bedroom apartment, a decline of two percent. In Discovery Gardens, which saw a 10 percent price slide in the third quarter as Nakheel released new units to the market at rents that undercut owners, leases held steady at AED38,000 a year. Property prices in Dubai soared after the city opened its real estate sector to foreign investors in 2002, granting them freehold ownership rights at many developments. Between 2007 and mid-2008 prices in the emirate rallied almost 80 percent, according to Morgan Stanley. But home prices in Dubai, the Gulf property market that had the biggest reversal because of the financial crisis, fell more than 60 percent in the wake of the global credit crunch. The value of real estate sales in Dubai in the first ten months of 2011 were down 85 percent compared to the same period in 2008, Land Department data shows. The city saw less than 1,700 real estate deals in the first ten months of the year, a 70 percent decline on sales made at the housing market’s peak. The release of some 10,700 new apartments and 1,300 villas to the market in 2012 could spur a minor fall in sales prices for apartments and villas, said Asteco. Properties in poorly-maintained projects are likely to be worst-hit as tenants upgrade to newer developments, the report said.  “Apartment and villa rents are seen steady in 2012 with minor declines for low quality and poorly managed buildings in certain areas,” analysts wrote. Transactions are expected to remain high as further supply enters the market leading to more price competition for owners and more choice for tenants.”