Find out where to rent for cheap in the UAE
Rental rates are dropping like flies.
That’s great for tenants and bad for property owners, but hey, it’s about time the people won.
According to Forbes, the UAE is currently seeing rental prices plummet.
Why is this happening?
According to Jones Lang LaSalle (JLL), a property investment management company, the cause of this drop is attributed to a new residential stock entering the market creating an oversupply.
As for Chesterton MENA, a real estate advisory, it said that overall sales prices for apartments and villas softened by 5% QoQ in Q1, denoting the highest quarterly drop in sales prices for apartments since 2014.
Residential property rents in Sharjah and the Northern Emirates have fallen by 11% on average from the previous year.
Knowing that commuters from Dubai to Sharjah are stuck in nightmarish traffic on a daily basis, lower Dubai rentals can potentially lead to a reverse relocation to the emirate, which also witnessed a 5-10% decline in rents last year, according to Chesterton MENA.
Studies have predicted that property prices and apartment rents will plunge further in Dubai due to oversupply and the impact of VAT.
The drops are expected to last until Expo 2020 when the emirate witnesses more business activities, i.e. demand more than supply, thus higher prices.
Cheap: Sharjah and the Northern Emirates
According to Q1 2018 the Northern Emirates Real Estate report, released by Real Estate Consultancy Asteco, the most significant drop was recorded in the Rolla area of Sharjah.
Across the Northern Emirates, apartment rental rates on an average dropped by 1% since Q4 2017.
In Sharjah and Umm Al Quwain, rents for studios to three-bedroom apartments declined by 1% in the same quarter and plunged over the years by 10% to 13% and 11% to 12% respectively.
Meanwhile, in Sharjah, rents dropped by 12% overall and by 1% year on year in Q1 2018. Rents remain unchanged in areas like Al Butina, Al Wahda, Abu Shagara and Al Yarmook, and certain areas like Rolla saw a 4% decrease in rents QoQ.
However, rents fell by 13% in Al Wahda, 14% in Abu Shagara, 7% in Al Butina and 9% in both Al Yarmook and Rolla in 2017.
“As a result of falling sales prices, many end users took advantage of the increased affordability of completed units, as evidenced by the 10% increase in recorded transactions from the previous quarter,” said Ivana Gazivoda Vucinic, Head of Advisory and Research, Chesterton MENA.
Off-plan seeing significant changes as well
The market has gone down by 12.5% since the start of the year as cash injections dropped sharply, with the main fall coming from the vital real estate sector.
“This was to the detriment of off-plan transactions, which although they still dominate the market, volume declined by 19%,” said Vucinic about Sharjah
“Dubai’s market has underperformed its GCC markets losing over 12% year to date, dragged by the sell-off in the real estate sector,” M. R. Raghu, Head of Research at Kuwait Financial Center, said.
“Fundamentally, the real estate prices have been falling and the market has been sluggish,” Raghu told AFP.
Dubai’s real estate witnessed a 46% fall in off-plan sales by value in the first quarter and a 24% decline in previously owned resales, he said.
The real estate of things
Sharjah, like its neighboring emirate, is all set to see an influx of supply.
By the end of Q4 2018, major residential projects in Sharjah such as Nasma Residences Phase 1 and Al Zahia Residences will be delivered, adding to residential supply in the emirate which didn’t see any residential or office projects completion in Q1 2018.
“The number of new launches dropped during the quarter, which appears to be a strategic decision by developers in a bid to stave off empty units or sales at reduced-price points,” said Vucinic
“However, with a substantial pipeline of stock due to release ahead of Expo 2020, sales prices are expected to drop further this year,” he added.