Yes, rent is getting cheaper in Dubai
In the first quarter of 2016 rents in Dubai dropped by 2.7 per cent, and real estate experts expect that they will drop a further 3 to 5 per cent throughout the year.
If this happens, it means Dubai rents overall will go down by around 7 per cent in 2016. So that means your apartment that currently costs you Dhs100,000 should cost you only Dhs93,000 by the end of the year.
Meanwhile high end areas – like the Emaar part of Dubai Marina and the Burj District – will see a 7 per cent decrease in the next three quarters (which means nearly a 10 per cent decrease in 2016 overall).
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This data comes from a new report by real estate experts Cluttons, in which they say “an immediate recovery in [rental] values appears unlikely”.
Here’s a graph from Cluttons that shows the average value of rentals by area in Dubai this year so far:
As you can see here, a two bedroom in a mid-range area should be at around the Dhs100,000 mark. So when a real estate agent insists that Dhs160,000 is standard for a two-bed in Business Bay or The Views, they’re not being truthful (at least according to Cluttons’ research).
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So why are rents dropping?
Overall, it’s the weakening economy that is seeing rents in the city drop.
Put it simply, there are fewer jobs in Dubai right now – especially at a senior level and in the banking and finance sectors – and that is what is lowering demand for apartments and villas in the city.
“Weakness in the jobs market tops our list of concerns,” the report says.
However, the fact that Dubai is now a key player in the global economy is also affecting rents: “As Dubai’s economy becomes more intertwined with the global economy, it will be influenced to greater extent by events in the international arena. With further weakness expected in China and the EU, a turn-around in global growth is unlikely this year.”
High end areas like the Palm Jumeirah are seeing the strongest decline due to “the scaling back of senior banking professionals based in Dubai”.
What about the Expo boost?
Yes, Cluttons acknowledges that the World Expo is “likely to impact the rate of job creation, which will have positive ramifications for both the sales and rental markets in the city.” However, they don’t see this having an actual effect until 2018.
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And sale prices?
Unfortunately for tenants, the drop in rents in Dubai haven’t matched the drop in sale prices for homes – in fact, The Lakes community in Emirates Living has seen a 13.3 per cent decrease in average values in the past year.
In fact, in the first quarter of 2016 residential values in Dubai fell more strongly than they have in any other quarter in the past five years (2.2 per cent in just four months).
Price wise, apartments have shown, in Cluttons’ words, “greater resilience” overall with only marginal declines and no change seen in some affordable parts of Dubai.
One area of Dubai, however, where sales prices have dropped is in Business Bay, where mid-range apartments have seen a 12.8 per cent decline in value year-on-year. So yes, if you’re renting in Business Bay soon, definitely negotiate.
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Photos: Getty Images.