Dubai rents to drop further by 3% to 5% this year
Slowdown in jobs market casts doubts on rental market.
The average cost of renting apartments and villas in Dubai continued to drop in the last 12 months and is expected to fall further this year, as the slowdown in the jobs market casts doubts on tenancy demand.
The latest data from REIDIN showed that rental prices in Dubai’s residential market dropped by 5 per cent in the last one year and 2 per cent in the first quarter of 2016. House prices also dipped by 1 per cent in the last three months.
According to Cluttons, the trend is likely to continue in the next few months, with the overall rents expected to post a further 3 per cent to 5 per cent decline this year, on average.
“Weakness in the jobs market tops our list of concerns, particularly if there is a spill over into sectors beyond finance and banking, which is already seeing a growing trickle of redundancies,” said Richard Paul, head of residential valuations at Cluttons UAE.
A number of companies have announced several job cuts and tightened their recruitment activity recently, raising concerns that the slowdown could ripple through the rental market.
Recruitment specialists also confirmed that there were fewer jobs on offer during the first three months of the year, although certain sectors, including healthcare, have posted online hiring increases.
Besides the employment slowdown, any uncertainties about the global economy could also have an impact on the domestic real estate sector. While news about the Expo 2020 could boost confidence about the economy, real results could materialise only until around 2018.
“As Dubai’s economy becomes more intertwined with the global economy, it will be influenced to greater extent by events in the international arena,” said Paul.
“With further weakness expected in China and the EU, a turn-around in global growth is unlikely this year. As we have stated previously, the impact of the World Expo is yet to materialise and 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 this is not expected until around 2018.”
Other property analysts, however, maintained that the Dubai or UAE property market has already stabilised and that real estate activity is poised to speed up.
“Dubai’s real estate market sailed stably through the first quarter. Not only did we see real estate developers carefully considering demand before supplying market with new units, we also saw an even distribution and movement of residents from the city centre to suburbs,” according to property portal Bayut.com.
“Maturity is the word commanding Dubai’s property market right now and the slight adjustments here and there spell nothing but stability to emirate’s residential sector.”