Dubai among top 3 cities to record huge rental growth
Savills, the leading global real estate adviser, released its latest report evaluating the rental values and yields reported for Prime Residential properties across the globe. Among the 30 cities in the Savills World Cities Index, Miami, Moscow, and Dubai recorded the highest levels of rental growth over the first half of 2021.
However, the overall results from the report indicate an average increase of just 0.5% across the cities, and a 1.8% drop over 2020 due to global restrictions on travel thereby reducing global demand.
Due to the vast array of development causing a significant oversupply in the market, Dubai rental prices have been on a steady decline over the last 6 years. 2020 witnessed the worst decline with a 12% drop in rents over the city due to travel restrictions and resulting economic decline caused by the pandemic. Based on the findings from the World Cities Prime Index Report by Savills, the Dubai market appears to finally be reaching a turning point. Prime rental prices increased by 5% in the first six months of 2021, driven by a 20% increase in rents across certain villa communities.
Swapnil Pillai, Associate Director Research at Savills Middle East said “Rental markets are likely to remain stable for the rest of 2021. Travel restrictions remain in place between key source markets, causing rental prices to recover more slowly than capital values. However, in the long run, prices are likely to gradually appreciate as economic activity gathers momentum and more job opportunities are created. The further easing up of travel restrictions will be a welcome catalyst for growth.”
The resurgence of the UAE’s real estate market continued in Q2 2021, with some segments seeing double-digit growth in sales prices. The Q2 2021 UAE Real Estate Report by property management experts Asteco revealed that villa rental and sales rates in Abu Dhabi and Dubai continued to surge, with sales prices in certain segments expanding by almost a quarter in the period under review.
Apartment rental rates across the Northern Emirates softened marginally with average declines of 1% to 2% over Q1 2021 and 6% annually.
Office rental rates in Sharjah remained unchanged over the second quarter of the year, with annual declines averaging 16%.
According to the Sharjah Real Estate Registration Directorate (SRERD), 40,364 transactions valued at Dhs 12.2 billion were recorded in H1 2021, a surge of over 40% compared to the same period last year. Most of those transactions occurred in the residential sector (49.6%), followed by commercial (37.1%), industrial (11.1%) and agricultural (2.2%).
In Sharjah’s master plan communities, apartment sales prices recorded a marginal increase of 2% on average, whilst the more mature GCC freehold areas showed signs of stabilising.
The report said that developers delivered approximately 2,070 apartments and villas in Q2 2021 in Abu Dhabi, particularly within Yas Island, and several buildings in Al Raha Beach.
The report notes that more than 9,350 residential units are set for handover before the end of the year; however, some projects are likely to experience delays and spill over into 2022.
Apartment rental rates in the capital softened marginally (by 1%) over Q1 2021. Annual declines, however, were more pronounced and averaged 8%. The report noted that mid and high-end properties were the most affected, with some units registering declines of between 10% and 15%.
The report indicated that villa rental rates recorded an average increase of 1% in Q2 2021, predominantly driven by the rise in interest for well-developed villa communities located on Yas Island, Saadiyat Island, and Al Raha Beach.
Tenant movement was dominated by residents looking to upgrade/upsize, with most shifting to villas and townhouses. The increased availability of units within the mid to high-end sector facilitated this move, the report said.
Rental rates for office space in the capital remained constant in Q2 2021 from the first quarter, with landlords offering incentives such as flexible rent period, service charges waiver and/or reduced fit-out cost. Rates for offices in the capital saw an annualised drop of 4%.
Global property agents Savills provides an extensive range of residential and commercial services across the United Arab Emirates, Oman, Bahrain, Egypt, and Saudi Arabia. Established in the Middle East over 43 years ago, expertise includes everything from financial and investment advice to valuation, planning, and property management. Originally founded in the UK in 1855, Savills has a long-standing history and over 600 offices across the Americas, Europe, Asia Pacific, Africa, and the Middle East.