Sharp fall in Northern Emirates' apartment rents

July 28, 2018

The apartment rental rates in the Northern Emirates continued their downward trend during the second quarter with an average 2 per cent drop since the first quarter of 2018, said a report by leading property expert Asteco.

The Asteco ‘UAE Real Estate Report Q2 2018’ report indicated an annual decline in villa and apartment sales and rental rates across the country.

It also highlighted key market trends, major project announcements and offered an outlook for the remainder of the year across Abu Dhabi, Al Ain, Dubai and the Northern Emirates.

In Sharjah, rental rates plunged 11 per cent during the second quarter compared to last year, with the most prominent drops recorded in Al Butina and Corniche (4 per cent). While the office rental rates in the emirate recorded quarterly and annual reductions of 3 per cent and 14 per cent respectively, stated the report.

High-end properties in Ajman recorded the highest annual decline of 13 per cent, putting the average rent for a three-bedroom unit between Dh40,000 and Dh53,000 ($10,888 to $14,427). However, the drop for the same unit type in Ras Al Khaimah was less pronounced at 7 per cent, with rental rates averaging Dh95,000 per year.

John Stevens, the managing director of Asteco, said: 'While the Northern Emirates continue to attract both tourists and expatriates, rental rates are not likely to recover in 2018 due to increasing supply. However, the Northern Emirates will remain popular among residents looking to invest in more affordable accommodation and in holiday destinations.'

A first-of-its-kind mixed-use business centre project in Fujairah spanning an area of more than one million sq ft, comprising an office, a hotel and serviced apartments along with a shopping mall and retail centre is set for handover by 2020.

Some of the much-anticipated prominent leisure destinations and hospitality projects for residents and tourists include the Fossil Rock Lodge, a luxurious resort in Sharjah that is set for completion in 2018.

On the residential front, several projects were launched this quarter including the Sapphire Beach Residence on Al Marjan Island in Ras Al Khaimah that is anticipated to be ready by 2020. In Sharjah, phase 4 of Nasma Residences and the East Village within Aljada development were launched.

'Ongoing infrastructure works, advancements in the legislative framework and government-backed, large-scale development projects, as well as the launch of exciting hospitality projects are expected to propel investments and tourism growth in the Northern Emirates,' he noted.

On capital Abu Dhabi, Asteco said the apartment sale prices in the secondary market remained relatively stable over the quarter, despite registering an average decline of 8 per cent year-on-year.

The Gate area recorded the highest drop of 18 per cent since 2017, followed by Al Bandar with a drop of 14 per cent, it stated.

While apartment and villa rental rates witnessed annual declines of 10 per cent and 9 per cent respectively, showing comparable patterns to the last quarter. Rental declines for studios to three-bedroom apartments ranged from 5 per cent to 18 per cent over the course of the year. The highest drops in the villa rental market since Q2 2017 were seen at Golf Gardens (14 per cent) and Al Raha Gardens (13 per cent).

In Al Ain, villa rental rates fell by an average of 7 per cent since Q1 2018 and 12 per cent annually, with a more pronounced drop recorded for larger four- and five-bedroom units, particularly on properties where rates and incentives were not aligned with the market.

'We are witnessing a shift in rental trends among residents in the Garden City. They now appear to be taking advantage of the decline in prices to move to high-quality, self-sustained communities with supporting facilities,' remarked Stevens.

'Such communities recorded high occupancy levels, in contrast to stand-alone buildings and villas that reported minimal uptake and high vacancy levels. To attract and retain tenants, landlords continue to offer incentives of up to one month of free rent and flexible payment terms of up to 12 cheques,' he noted.

In Dubai, villa and apartment sales prices declined by 4 per cent over the quarter, with an annual drop of 11 per cent. The decline in apartment sales was most prominent in Dubai International Financial Centre (DIFC), Discovery Gardens and Dubai Sports City that registered a 6 per cent decline since Q1 2018. Meanwhile, the highest quarterly drops in villa sales prices were observed in Jumeirah Park (8 per cent), Arabian Ranches (5 per cent) and The Springs (5 per cent), according to Asteco.

Despite a lower number of anticipated handovers, a significant volume of new supply was delivered in Dubai in the second quarter, contributing to an overall quarterly drop in apartment and villa rental rates of 3 per cent and 2 per cent, with annual declines of 12 per cent and 10 per cent respectively, said the property expert.

Speaking on the overall outlook for UAE’s real estate landscape, Stevens said: 'Proactive government initiatives and ongoing infrastructure development are expected to further boost market sentiment and drive investment in the UAE.'

'The latest positive announcements include the freezing of school fees for the academic year 2018-2019, as well as the introduction of a 10-year residency visa for investors and specialists, and 100 per cent foreign ownership of companies outside free zones,' he stated.

'The UAE is continuing to live up to its reputation of being a real estate investment haven, and the new laws will attract an untapped pool of international investors seeking a tolerant country with deep-rooted values to call home,' he added.