A leading property consultant has warned that the rising cost of living in Dubai is “starting to become a very real concern for many residents” as new figures show residential rents have surged by an average 22 percent in the past year.
Mat Green, Head of Research & Consultancy UAE for CBRE Middle East, said rentals had increased by an average 45 percent in the past two years in the emirate, in what he expected would lead to an increase in occupiers starting to consider Sharjah and the Northern Emirates as a cheaper alternative.
It follows similar comments last week from John Stevens, of real estate services company Asteco, who said the continued rise in rents could herald the start of a flight to
affordability for budget-sensitive Dubai residents, who consider relocating to Sharjah, Ajman or further afield in the Northern Emirates.
CBRE’s Dubai Market View Q1 report said apartment rentals had increased by 29 percent year-on-year while villa rentals had grown by 15 percent.
“The rising cost of living in the emirate is now starting to become a very real concern for many residents,” Green said.
Quarter-on-quarter, CBRE said rental growth had been more marginal at around 2.8 percent, with apartments rising by three percent and villas by 2.6 percent.
The CBRE report said the strongest sub-markets for apartments were Dubai Sports City, Downtown Dubai, JBR, International City and Dubai Silicon Oasis. For villas the best performing markets were Al Warqa and Springs.
“Dubai’s residential sector continues to experience growing demand from both occupation and transactional sources. Despite recent regulatory changes, both rental and sales prices continue to rise, albeit at a marginally slower rate than was recorded during the previous quarter,” Green said.
The report said the residential development pipeline was again starting to swell. It said though the number of upcoming projects was still far smaller than the last cycle,
there was a danger that further down the line supply could again start to exceed demand fundamentals.
“During 2014, close to 17,000 new units are expected to be completed with the majority of these set to be delivered in secondary locations such as Dubailand, Jumeirah Village Circle and Silicon Oasis,” Green said.
“Over the next four years roughly 65,000 new units are penned for completion, with 83 percent of these apartments, and villas and townhouses comprising the balance.”
Green said it anticipated residential rental and sales growth would continue throughout 2014, though with growth levels lower than 2013 performance as affordability becomes a more influential driver of property moves.
The report said while rental inflation was becoming an issue in the residential sector, the commercial office market still remained cheap when compared against peak rates.
According to the report, office rentals in Dubai continue to rise, with average prime CBD rentals up three percent quarter-on-quarter and 21 percent year-on-year. More than 1.8 million square metres of office stock is set to be delivered by the end of 2017. However, whilst there is a large pipeline of new supply, the majority of this space will be negatively impacted by its strata ownership title.
During 2014, around 0.44m sqm is scheduled for completion, with close to 30 percent of this in Business Bay.