Dubai rent rises ‘unsustainable’ as first quarter figures revealed

Asteco report says more and more tenants may be pushed to relocate in northern emirates as rents rise 10 per cent in Dubai Marina and 13 per cent in The Springs during first three months of 2014.

Asteco brokers reported that rents in International City and Jumeirah Lakes Towers, above, rose by the highest amounts during the first quarter of 2014. Jeffrey E Biteng / The National

The cost of renting in the UAE is rising by “unsustainable” levels pushing residents to move out to cheaper locations, property brokers say.

Average annual apartment rents for new tenants in Dubai increased by 5 per cent over the three months to the end of March, while villa rents rose 3 per cent, Asteco reported yesterday.

It said that at International City on the outskirts of Dubai there were some of the biggest rent rises, with average rents up by 11 per cent during the first quarter of 2014 to Dh50,000 for a one-bedroom flat – equating to an 80 per cent increase over the year.

International City was designed in 2004 as a scheme for low and medium-income residents. But as homes in other locations became more affordable during the global financial crisis, middle-income tenants moved out and rents fell by about 80 per cent in 2009 and 2010.

Rents at Jumeirah Lakes Towers, viewed by many as a cheaper alternative to Dubai Marina, also rose by 11 per cent over the quarter to Dh105,000 for one-bedroom apartment – a 62 per cent increase compared with a year before.

“This continued rise in rents could herald the start of a flight to affordability for budget-sensitive Dubai residents, who may well consider relocating to Sharjah, Ajman or farther afield in the Northern Emirates,” said John Stevens, the managing director of Asteco.

In Abu Dhabi, property brokers say that rent rises during the start of the year have been even steeper and are pushing tenants to move to cheaper “off-island” locations.

According to CBRE housing rents across Abu Dhabi rose by 10 per cent during the first quarter as landlords benefited from a decision by the Abu Dhabi Government to remove a cap on existing rents at the end of last year.

Rents in “off-island” locations rose by the highest amounts, with average increases over the period of a staggering 14 per cent.

“With affordability fast becoming a concern for many residents, there has been a steady rise in demand for more affordable housing options, with off-island locations such as Khalifa City A and Mohammed bin Zayed City becoming popular options for the more budget focused tenants,” said Matthew Green, the head of research at CBRE’s Dubai office.

And brokers say that house prices in the UAE are also continuing to rocket. According to JLL, housing sales prices in some parts of Dubai had now reached the same levels as those at the height of the 2008 peak.

“Values for the best quality buildings in areas such as the Marina and Jumeirah Lakes Towers have now reached those seen in the market peak in 2008, with average sales prices in the range of Dh1,450 per square metre in the Marina and Dh1,100 per square meter in JLT,” said Craig Plumb, the head of research at JLL’s Dubai office.

Asteco also said that sales prices for homes in Dubai also rose significantly over the quarter, with apartment prices up by 3 per cent and villa prices up 6 per cent.

It said that apartment prices in DIFC rose the fastest in the first quarter, increasing 9 per cent to between Dh1,800 and Dh2,300 per sq foot. Prices at Jumeirah Lakes Towers grew 8 per cent during the same period to between Dh1,100 to Dh1,500 per square foot.

The property website Bayut.com reported that asking rents for apartments across the UAE advertised on its website rose 5.76 per cent during the quarter and villa rents rose 6.46 per cent. It said that average asking prices for apartments increased 14.35 per cent, while villa prices rose 11.27 per cent.

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