By CW Staff www.constructionweekonline.com
A report in to the state of the housing market in the UAE shows that the region is still feeling the effects of the global economic turndown, with a continued decline in residential prices and rental rates.
In its third quarter market report in to the Dubai, Abu Dhabi and Sharjah markets, Middle East property specialists Cluttons says that the decline in property prices and drop in rental rates has come about as a new supply of developments has come on stream.
Dubai rental rates have continued the downward trend established in Q2 2009, dropping a further 8.2% on two bedroom apartments and 4.2% on three and four bedroom villas. The average annual rent on a two bedroom apartment is now below AED100,000.
The new supply means both buyers and tenants are in a strong position to negotiate on prices, the report states. With 55,000 new residential units expected in Abu Dhabi by 2013 further room for negotiation is expected
News that Nakheel is to restart six of its Dubai projects, including Jumeirah Park, Jumeirah Village and Al Badrah is, however, a welcome relief for investors. The report says that secondary sales of properties within the projects would also restart, increasing the number of three and four bedroom villas.
The global downturn and increasing supply has also given commercial property tenants across the three emirates firmer territory to renegotiate terms. The report states that while rents remained reasonably stable in Dubai’s Jumeirah Lake Towers, Business Bay and TECOM Area C, all three areas suffer the highest vacancy levels. The report states that even Dubai International Financial Centre and Emaar Boulevard, although still able to command the highest rental returns in the UAE (AED250 and AED200 respectively), were starting to succuumb to market pressure – with rents starting to slowly decline while void levels were increasing..
Rates in Abu Dhabi for commercial property have taken a 50% dive since 2008. With more than 400,000m2 of additional office space becoming available over the next 18 months, the report says prime office space supply in Abu Dhabi is at an all-time high.
Some areas of Sharjah have seen a 9% drop in residential rental rates, while commercial rates in the centre of Sharjah city have dropped to AED50 per square foot – compared to the UAE high of AED 250 per square foot in the Dubai International Finance Centre (DIFC).
Sharjah’s free zones are also proving exceptionally successful with the sea and air freight sector, with average rents remaining above AED25 per square foot compared with AED30 at Dubai’s Jebel Ali Free Zone. Rates across the UAE remain stable as investors re-enter the region.