Dubai rents to fall in 2017 as new homes come to market
Thousands of new homes mushrooming up in Dubai’s new suburbs and a continued economic slowdown will keep rents falling in 2017, brokers predict.
According to property broker Core Savills, housing rents in Dubai’s suburbs could fall by up to 4 per cent next year after dipping by up to 5 per cent in 2016 as developers hand over new developments amid a stuttering economy.
In its 2017 forecast published on Monday, Core Savills says that rents for tenants in suburban areas such as Jumeirah Village and Dubailand, could drop by between 2 and 4 per cent next year as more than 20,000 new homes are completed in Dubai – most of which are outside of the city centre.
The broker estimates that just 19 per cent of those homes – about 3,800 – are due to be built in the most established and central parts of the city next year with much of the bulk of new stock coming online in new communities including Mohammed Bin Rashid City and Dubailand.
Core Savills forecasts that a glut of new “so-called” affordable housing will also push down house prices in many of these new communities even though it is predicting an uptick in average prices across the city next year and no change for rents in prime areas.
“We continue to see rents in lease renewals to be marked down or at least see no change,” said David Godchaux, Core Savills’ chief executive. “We foresee few submarkets to underperform – particularly the affordable and low-mid market segment are likely to be negatively impacted by the large amount of pipeline supply.”
Jesse Downs, the managing director of Phidar Advisory, goes even further. She predicts that sales prices and rents across Dubai will continue to weaken next year as the slowing economy forces companies to downsize, dampening demand while the strong US dollar encourages investors to lower their budgets.
“It seems stakeholders forget to ask the simple question: who will live here and why?” Ms Downs says. “Investors, squeezed by the strong US dollar, low oil price or other factors in their local markets, are more price sensitive and buying properties with a lower total value. Developers are responding with smaller unit types and smaller average size of each unit type.
“A unit mix highly skewed toward smaller unit types and/or with small unit sizes are suitable in dense urban areas with excellent amenities but are likely unsuitable in low-density and/or far-flung suburban communities.”
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