Last Updated: January 12. 2009 1:41AM UAE / GMT
Source: Thenational.ae //
By rditcham@thenational.ae
Abu Dhabi // The rise in rent for many apartments in Dubai and Abu Dhabi slowed to a standstill in the last three months of the year, according to a new housing report, bringing relief to some tenants after years of soaring prices.
The average cost of renting a one-bedroom flat in Dubai rose by only four per cent last year and did not rise at all in the last three months, the UAE-based property services firm Asteco said in its fourth quarter report, which will be published in full today.
In Abu Dhabi, rents for units with two or three bedrooms also levelled off, although demand for smaller, less expensive homes pushed up prices for one-bedroom flats, the company said.
After years of extreme rental inflation, where average prices climbed by more than 100 per cent, it seemed the UAE would at last enjoy a sustained period of stability, Andrew Chambers, the managing director of Asteco, said yesterday.
“Certainly for the next three to nine months I don’t think there will be anything that will cause a move back to rapid inflation,” Mr Chambers said.
Some property analysts expect the market to soften further as redundancies and recruitment freezes lead to lower housing demand.
Myles Bush, the managing director of Powerhouse Properties, a Dubai-based estate agency, said the number of people starting new leases in Dubai was declining.
The cooling rental market, also a result of an increase in housing supply and prices having reached the limits of affordability, will bring some relief to tenants.
In addition, landlords are relaxing payment terms, allowing tenants to pay rent monthly, rather than with two or three cheques a year.
Jerome Abad, an Italian living in Dubai’s Jumeirah Beach Residence (JBR), said he was relieved that rents finally seemed to be easing.
“My landlord has set me a fair rent compared to market prices, which takes a weight off my mind,” Mr Abad said. “I certainly haven’t heard as many people complaining about their rent in the last six months as before.”
Meanwhile, an International City resident seeking to move to Discovery Gardens said he was quoted about Dh120,000 (US$32,671) in annual rent for a one-bedroom flat in August, but was asked for Dh80,000 to Dh85,000 this month.
“Rents seem to be staying the same in International City but going down in Discovery Gardens,” he said.
Average annual rent for studios, and apartments with one, two and three bedrooms in Dubai were Dh80,000, Dh123,000, Dh165,000 and Dh243,000 respectively, Asteco said.
Average rents for villas in Dubai climbed by just eight per cent between the third and fourth quarters of last year. The company did not release similar figures for the capital.
“A lot of this [stabilisation] has to do with new supply and tenants being unwilling to pay the extra,” Mr Chambers said.
“For the second and third quarters of 2008 the prices were too high to be sustainable and people couldn’t afford it, while in the last quarter people were perhaps leaving or stock was coming on the market.”
New housing has been delivered in projects such as International City and Discovery Gardens, both developed by the UAE-based Nakheel.
In addition, property owners in JBR who had been reluctant to put their homes on the rental market, preferring to watch them appreciate in price before selling, are now keen to earn rental income amid tumbling sales prices.
The trend has reduced pressure on Dubai and Abu Dhabi’s housing authorities to renew the five per cent caps that applied to rent rises last year.
Rera, Dubai’s property market regulator, said a rental index would soon be released after approval from the Royal Court, and would provide price bands for various types of property in different areas of the city.
It is intended to give tenants a reliable source of information on the costs of accommodation in different neighbourhoods and act as a safeguard against greedy landlords, Rera said.
There has been no indication about this year’s rental legislation in Abu Dhabi but many expect the five per cent rent cap to be maintained because of the capital’s shortage of rentable housing.
Although rents declined in the latter months of last year, according to Asteco, average apartment prices in the capital increased significantly over the full 12 months.
Rents increased by between 80 per cent and 160 per cent in the 12 months starting December 2007, depending on the size of the apartment, the company’s report said. No quarterly comparison was available.
Rates for villas in Abu Dhabi experienced “steady growth”, with the highest increases being in Al Raha Gardens and Khalifa A, the report added. Rents for three-bedroom homes within these projects went up by 14 per cent and 16 per cent respectively, compared with the previous quarter.
The capital’s average annual rental rates for villas with three, four and five bedrooms were Dh375,000, Dh445,000 and Dh535,000 respectively.
Meanwhile, Al Ain’s residential market has also undergone a price rise due to bulk renting of apartments by companies, Asteco said.
Demand was further increased by Abu Dhabi and Dubai residents renting villas in Al Ain and commuting to offices in the UAE’s two largest cities.
Apartment rates in Al Ain continued to increase but were mostly lower than villa rentals.
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