Asking prices for villa rentals in Dubai have fallen by 34% in the first three months of 2009, from their levels at the end of December 2008, a new report has found. Apartment rentals in the city have also fallen, by 22%, in the same period.
A quarterly report on the Dubai property market by property services company Asteco has found that residential rental rates have fallen across property types in the emirate.
The report compared asking prices in Q1 2009 with those at the end of Q4 2008.
Villa rentals fell by 34%, while apartment rentals fell by 22% on average.
As well as falling prices, the report highlights the change in renting options that landlords and property owners in Dubai have begun to implement. Tenants now have options to pay with up to 12 cheques, and have greater grace periods.
These initiatives are partly a reaction to the restricted access to bank financing, making the former one cheque system difficult to maintain, and partly a reaction to tenants' new found range of pricing choices.
New apartment prices
The report found that average rents for studios, one bedroom, two bedroom and three bedroom apartments over the course of Q1 2009 stood at Dhs61,500, Dhs93,000, Dhs132,500 and Dhs185,000 respectively.
Newer developments are attracting the majority of consumer interest as units come online and the surrounding infrastructure nears completion.
'Developments such as Jumeirah Beach Residence have received a great deal of interest due primarily to the abundance of retail shops and restaurants on the Walk, its proximity to Dubai Marina Mall, its completed infrastructure and the fact that's it's well occupied,' says the report.
Capital sale prices for apartments have suffered a larger fall than rental rates, with the decline averaging at 39% over Q1 2009, from December 2008. The report points to prices beginning to stabilize, but only as they approach initial project launch levels.
The report finds that villa rental returns over the course of Q1 now fetch an average of Dhs160,000, Dhs215,00, Dhs264,000 and Dhs366,000 for two-, three-, four- and five bedrooms properties respectively. Villas in the Springs development have seen the largest percentage falls in rental returns. Capital sale prices for villas have fallen by an average of 43% from Q4 2008 levels.
'Tenants are now in a stronger position to re-negotiate rental contracts. Landlords have recognized that they have to entice tenants with competitive rents, or offer alternative payment options and benefits,' the report states.
Rental prices are unlikely to resume growth over the short term as the city adjusts to changing rates of immigration/emigration and more units come onto the market.
The rates given by the report, being averages of transactions over three months, are still above the current asking prices for annual leases for most of the named property types.