Chestertons analytical agency called Dubai landlords’ behavior of expecting further rental prices increase short-sighted and creating an artificial shortage of units in the rental market.
Today, many property owners in Dubai took a wait and see strategy towards leasing their apartments and houses. They believe that the current decline in prices in the lease segment is a short-term anomaly and do not want to sign long-term contracts so that receive lower rent during next three to four years. However, experts believe this behavior is not only unreasonable but also harmful to the market.
In the first half of the year Dubai rental prices have decreased by an average of 3-4%, mainly due to the market weakness, which affected also the sales segment. And since the fall in prices in the lease segment was not as obvious as in the sales segment, homeowners thought it was a temporary decline, and began creating an artificial shortage of housing in the rent sector, breaking supply and demand balance, Chestertons experts say. Therefore, some of the apartments in Dubai stay vacant for three or four months, and sometimes even more.
However, a bunch of new residential projects is about to enter Dubai rental market in the short term. By the end of the year 20 thousand new housing units are to be handed over in Business Bay, Dubailand, Sports City and Silicon Oasis causing another downward price correction in the rental market.
Chestertons experts called the current rental prices in Dubai uncompetitive and unsustainable, especially in older areas such as Bur Dubai and Karama. This is despite the fact that after the construction boom and the subsequent crisis of 2008-2009, the annual average rentals for one-bedroom apartments in Karama, for instance, have decreased by USD 5,500. Therefore, owners are advised not to wait, and lease their homes for the current price, and tenants are promised further decline in prices.