- Report highlights declining apartment rental rates in the Northern Emirates with quarterly drops of 2%
- Sharjah office rental rates recorded quarterly reductions of 3%
- Proactive government initiatives expected to boost market sentiment, drive investment in the UAE
Dubai-UAE: 25 July, 2018 – Asteco’s ‘UAE Real Estate Report Q2 2018’ has indicated an annual decline in villa and apartment sales and rental rates across the country. The quarterly report also highlighted key market trends, major project announcements and offered an outlook for the remainder of the year across Abu Dhabi, Al Ain, Dubai and the Northern Emirates.
In the Northern Emirates, apartment rental rates continued to soften with an average drop of 2% since Q1 2018 and registered a decrease of 11% over the year. High-end properties in Ajman recorded the highest annual decline of 13%, putting the average rent for a three-bedroom unit between AED40,000 and AED53,000. However, the drop for the same unit type in Ras Al Khaimah was less pronounced at 7%, with rental rates averaging AED95,000 per year.
In Sharjah, rental rates continued their downward trend dropping on average by 2% in the last quarter and 11% annually, with the most prominent drops recorded in Al Butina and Corniche (4%). While Sharjah office rental rates recorded quarterly and annual reductions of 3% and 14% respectively.
John Stevens, Managing Director of Asteco, said: “While the Northern Emirates continue to attract both tourists and expatriates, rental rates are not likely to recover in 2018 due to increasing supply. However, the Northern Emirates will remain popular among residents looking to invest in more affordable accommodation and in holiday destinations.”
A first-of-its-kind mixed-use business centre project in Fujairah spanning an area of more than one million square feet, comprising an office, a hotel and serviced apartments along with a shopping mall and retail center is set for handover by 2020.
Some of the much-anticipated prominent leisure destinations and hospitality projects for residents and tourists include the Fossil Rock Lodge, a luxurious resort in Sharjah that is set for completion in 2018.
On the residential front, several projects were launched this quarter including the Sapphire Beach Residence on Al Marjan Island in Ras Al Khaimah that is anticipated to be ready by 2020. In Sharjah, phase 4 of Nasma Residences and the East Village within Aljada development were launched.
Stevens said: “Ongoing infrastructure works, advancements in the legislative framework and government-backed, large-scale development projects, as well as the launch of exciting hospitality projects are expected to propel investments and tourism growth in the Northern Emirates.”
In Abu Dhabi, the capital of the UAE, apartment sale prices in the secondary market remained relatively stable over the quarter, despite registering an average decline of 8% year-on-year. The Gate area recorded the highest drop of 18% since 2017, followed by Al Bandar with a drop of 14%.
While apartment and villa rental rates witnessed annual declines of 10% and 9% respectively, showing comparable patterns to the last quarter. Rental declines for studios to three-bedroom apartments ranged from 5% to 18% over the course of the year. The highest drops in the villa rental market since Q2 2017 were seen at Golf Gardens (14%) and Al Raha Gardens (13%).
In Al Ain, villa rental rates fell by an average of 7% since Q1 2018 and 12% annually, with a more pronounced drop recorded for larger four- and five-bedroom units, particularly on properties where rates and incentives were not aligned with the market.
Stevens pointed out: “We are witnessing a shift in rental trends among residents in the Garden City. They now appear to be taking advantage of the decline in prices to move to high-quality, self-sustained communities with supporting facilities. Such communities recorded high occupancy levels, in contrast to stand-alone buildings and villas that reported minimal uptake and high vacancy levels. To attract and retain tenants, landlords continue to offer incentives of up to one month of free rent and flexible payment terms of up to 12 cheques.”
In Dubai, villa and apartment sales prices declined by 4% over the quarter, with an annual drop of 11%. The decline in apartment sales was most prominent in Dubai International Financial Centre (DIFC), Discovery Gardens and Dubai Sports City that registered a 6% decline since Q1 2018. Meanwhile, the highest quarterly drops in villa sales prices were observed in Jumeirah Park (8%), Arabian Ranches (5%) and The Springs (5%).
Despite a lower number of anticipated handovers, a significant volume of new supply was delivered in Dubai in Q2 2018, contributing to an overall quarterly drop in apartment and villa rental rates of 3% and 2%, with annual declines of 12% and 10% respectively.
Speaking on the overall outlook for UAE’s real estate landscape, Stevens said: “Proactive government initiatives and ongoing infrastructure development are expected to further boost market sentiment and drive investment in the UAE. The latest positive announcements include the freezing of school fees for the academic year 2018-2019, as well as the introduction of a 10-year residency visa for investors and specialists, and 100% foreign ownership of companies outside free zones. The UAE is continuing to live up to its reputation of being a real estate investment haven, and the new laws will attract an untapped pool of international investors seeking a tolerant country with deep-rooted values to call home.”
Asteco, a major regional and international real estate firm and the largest property services company in the UAE, was founded in Dubai in 1985. Asteco offers independent market analysis, design development consultancy and valuation services, sales and leasing services, as well as asset and property management services.
For more details, please visit www.asteco.com