While the Dubai housing market is expecting thousands of new apartments and villas to be released onto the market in 2015, Better Homes does not anticipate a substantial corresponding drop in rental rates.
The reason for this view, as our head of Residential Sales and Leasing for Better Homes Real Estate explains, is based on the fact Dubai’s growing population continues to increase ensuring a continued demand for accommodation; therefore, the 25,000 units about to enter the market will find themselves with ample potential tenants assuming all scheduled properties are completed on time. Estimates state that the population of Dubai increased by five percent in 2014 exceeding 2.3 million.
He added that, “If Dubai’s present population is about three million and the population is growing by three to four per cent per year, then that’s roughly another 105,000 people to house. Assuming three people per property, that’s another 35,000 homes needed by the end of this year to meet demand; in which case 25,000 is actually not enough. But the equation is obviously more complex than that, so frankly, it’s very hard to tell but our view is that rents will generally remain stable other than in a few years that receive a lot of supply, in which case rents may fall a bit for six to eight months before picking up again.
” However, what we may expect is for some Dubai communities that experience an influx of these new apartments and or villas to see a very small dip in their overall rental rates, but the general trend across the market to be one of property rate stability.Based on Better Homes client enquiry trends, what is expected is the demand within the majority of residential communities around Dubai to remain high and therefore in sync with the newly released rental properties.
Even though some analysts of the Dubai property market have stated they expected many Dubai tenants to spend less on annual rent in 2015 than during previous years once the 25,000 soon to be released properties are in the system and driving the overall rents down, Better Homes does not believe this will be the case.
Other Dubai-based property agencies predicted a substantial drop in rental rates at this start of this year, some by as much as 5%, however this has not been the case as there were particular areas that instead experienced a slight increase. Other agencies also predict a larger drop in rental rates from next year onwards. With Dubai’s expatriate population expected to increase as Expo 2020 fast approaches, more people, particularly the middle-income levels of the society, will need properties to rent at affordable rates so ensuring there are ample available units in a broad range of communities to service this segment is important.