Rental rates for apartments and villas in Dubai saw marginal increases of 2% and 3% in the second quarter of this year, a new report shows.
The rise is generally due to the lack of a certain unit type, whether that is larger apartments such as three bedroom units in towers or smaller townhouses in villa communities, says the report from property firm Asteco.
The reason for the shortage of a particular unit type is either the low number of units initially available in the development or the high occupancy rates within certain projects, it adds.
Asteco has also witnessed a rise in rates in emerging communities such as Jumeirah Village which is partly due to the increasing rents in established developments and consequent outflow of residents unwilling or unable to pay the hiked rate. In addition, demand is picking up as infrastructure, landscaping and retail provision improve.
It also shows that after seeing some marginal increases in the beginning of the year, sales prices for residential units remained unchanged over the last three months.
‘Although an increasing number of units are advertised at inflated prices, we believe owners are merely testing the waters as they are in no rush to sell and these properties are unlikely to move,’ it explains.
Meanwhile, its report on neighbouring Abu Dhabi shows that selective new prime developments offering high quality finishes and amenities have generally been able to sustain rental levels over the last quarter given strong levels of demand.
Older buildings formerly considered prime have seen vacancy levels increasing as tenants relocate to new developments leading to landlords reducing rents.
‘Consequently there is a widening rental gap between prime developments and the rest of the market,’ the report says.
It points our that the new regulations being implemented linking the renewal of residency visas with accommodation arrangements is starting to impact the market with an increase in demand for mid to low budget two to three bedroom apartments in Central Abu Dhabi.
The second quarter of 2012 has seen a limited addition of new major projects, with the exception of Eastern Mangroves Hotel & Spa by Antara situated on Salam Street developed by TDIC comprising a five star luxury hotel and 220 premium quality waterfront apartments, 50 of which had been handed over by September 2012.