What was the general market movement in Q2?
Rental rates continued to soften in the second quarter of the year, across both the apartment and villa segments.
Property services company Asteco reported a fall of 4 per cent during the quarter for apartments and 2 per cent for villas with annual declines around the 10 per cent mark.
Chestertons meanwhile reported a deeper decline of 5 per cent for apartments and 8 per cent for villas.
Consultancy Cavendish Maxwell said apartment rents were down 12.5 per cent year-on-year and villas 12.6 per cent.
The downward pressure was as a result of additional supply coming to the market, and the expectation is for more declines throughout the year and into the first quarter of next.
What else did the property companies have to say?
The bottom line: it continues to be a tenant's market with opportunities aplenty for those seeking a move or just arriving. Landlords are offering lower rates to existing tenants and rent-free periods of up to three months, while others are offering multiple rent cheques, shorter leases and a waiver of security deposits.
"Whether tenants want to upgrade, downsize, or remain in their current property, the ongoing downward correction in Dubai’s rental market is providing leverage for them to get the best possible deal," said Chestertons.
It added that the largest rent reductions are likely in in locations such as Jumeirah Village Circle, Business Bay and Dubailand as this is where the most significant supply is arriving.
Asteco said vacancy rates are on the rise in the older properties as affordable villa communities such as Damac's Akoya and Nshama Town Square have come on the market.
How does the supply situation look for the rest of the year?
There was plenty in the second quarter, and there's plenty more to come. The handover of 5,250 apartments took place between April and June, according to Asteco, plus 1,300 villas. The majority of this was located at Dubai Creek Harbour, Dubai Hills Estate and Dubai Marina where new stock included Sparkle Towers and The Residences at Marina Gate.
It projects a further 12,000 apartments in the second half of the year, along with 5,000 villas.
Chestertons said more than 20,000 new units were delivered in 2018 and "the projections for the remainder of 2019 are significantly higher".
A total of 20,978 residential units were completed in the first half of 2019, according to Property Finder estimates. An additional 38,426 residential units within 152 projects that have at least an 85 per cent completion status as of July, are scheduled to be delivered by the end of the year, it said.
New projects on the way include Arabella villas, Seventh Heaven in Al Barari, Acacia apartments in Park Heights within Dubai Hills Estate, townhouses and apartments in Town Square, Phase 1 and 2 of Azizi Victoria,Wind Tower 1 and 2 in Jumeirah Lakes Towers and three new towers in Al Habtoor City.
Anything else of note?
Yes, this whole rental situation could see big changes in the near future. The Dubai Land Department announced in May that it is studying a proposal to freeze rents for three years after landlords and tenants sign a contract.
"The new rental law and the three-year contract that the Land Department is drafting is being studied by the relevant departments," a DLD spokesperson said. "The new law will be formally issued in the near future."
More recently, Dubai announced the formation of a higher committee for real estate that aims to achieve a balance between supply and demand in the sector.
"In the next phase, we need [to pitch] quality projects, exceptional ideas to boost our economy," said Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai in an open letter on September 6.
"Real estate projects need to control their pace to bring added value to the national economy so as not to become a burden and a source of imbalance in our economic process."
In light of the rental declines during the past couple of years, Dubai has been named one of the top cities in the world for how many square metres of prime property can be bought for $1 million.
Source: The National
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