Dubai rents have started to fall for the first time in three years.
It could spell the end of a period of unprecedented housing inflation in which rising rents forced thousands of tenants to downsize or moved out of the emirate.
And with 19,000 homes expected to be handed over in Dubai next year, landlords may struggle to raise rents.
After 10 consecutive quarters of growth, average residential rentals dipped by 1 per cent this quarter, according to a report from the real estate company CBRE to be released today.
“The dip in rentals has been attributed to an increase in new residential stock combined with weaker demand during the traditionally slow festive and holiday period,” said Matthew Green, the regional head of research and consultancy at CBRE. The biggest falls were in freehold areas such as Downtown Dubai and International Media Production Zone, where rents dropped by an average of 3 per cent.
Other locations including the Palm Jumeirah, Business Bay, International City and Motor City recorded declines of about 2 per cent.
However, rent declines were not recorded across the entire city, with Dubai Marina and The Greens showing stable rents during the period.
The rapid rise in Dubai rents that started to gain traction in early 2012 forced thousands of people to either search for smaller homes or relocate to emirates such as Sharjah and Ajman. The spillover effect also helped to drive rents higher in those locations.
At the same time disputes between landlords and tenants rocketed as owners looked for ways to evict sitting tenants and circumvent rent caps while tenants sought loopholes in eviction notices to remain in their accommodation for as long as possible.
The cooling rental market comes as brokers start to report parts of the residential sales market slowing.
“There has been a very marked slowdown in volumes of transactions,” said Simon Townsend, the regional business development manager at DTZ.
But that is unlikely to dampen spirits at this year’s annual Cityscape Global property exhibition, which gets under way in Dubai today.
The event is expected to be the biggest in five years, with the number of exhibitors up by more than a quarter on last year. More than 32,500 visitors flocked to the show last year.
Average residential property prices have increased by 56 per cent across Dubai since August 2012, according to JLL, the international property consultancy. Rents have surged by about 41 per cent over the same period.
Such increases have prompted some warnings from business leaders that housing market inflation was threatening the competitiveness of the emirate.
Inflation in the emirate reached a five-year high of 3.5 per cent last month, with housing and utility costs the biggest reason behind the rising cost of living.
scronin@thenational.ae
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