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Lower Rents Anticipated In Dubai This Year And Why

2017 will be another year anticipated well for the tenants as well as for the property buyers with the rents and residential rates falling by 5-10% as 16,500 new units’ supply is expected to put further downward pressure on the prices.

Global ratings for 2017 say that it’s another tough year after the corrections in the previous year for the real estate market of Dubai. Any sign of market improvement for the UAE real estate sector ruled out, even though the housing affordability is improving from the current price environment.

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Picture Courtesy: emirates247.com

2016 faced many types of fallout like low oil prices and never-ending currency woes. The residential rates hit a low with 8-11% on an average and rents fell by 6% affecting most of the areas of the city. For tourists, UAE has become costly because of dollar strengthening and low oil prices previous years have reduced the purchasing power thus weakening the investor sentiment.

Similarly, British Pound’s relative weakness against Dirham is another reason for the downbeat outlook making the real estate sector less attractive for UK nationals who are the 4th largest investors in residential real estate segment in the 1st half of 2016.

The pound dropped by 17% as against the US dollar over the last one year because of Brexit fear. For UAE, pound remains a concern as the UK is traditionally among the top three source markets in terms of visitors to Dubai.

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Picture Courtesy: www.gitex.com

Any negative movements in the ratings of real estate sectors are not foreseen for coming 12-18 months as the developers will be busy in absorbing the fall of the house prices too low debt burdens & strong balance sheets. Well rated companies of real estate are hedged due to their high asset quality and a large period of lease structure.

According to the rating agency, residential prices and rents are bound to decline further because of continued currency woes, while the office property segment is expected to be stable as a result of the subdued corporate activity.

The low in retail sales is likely to continue because of dollar strengthening and hotels will struggle with excessive supply despite tourism numbers being resilient. However, the expected rated developers will absorb the foreseen fall in the house prices because of their strong margins, low debt burdens, and strong balance sheets.

Along with the euro, Chinese yuan renminbi & pound, the Indian rupee has also declined by 7, 2 &3 % respectively.

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