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Demand-supply ratio may soften UAE housing rentals

DUBAI, February 13, 2016

The rental market in the UAE’s  real estate sector will soften further in 2016 due to the widening gap between demand and supply.

The focus on the affordable housing market sector will further enable the industry to maintain sustainable growth levels, stated global property agency Chestertons.

The industry expert also called upon developers to consider projects within the ‘affordable segment’ to further support this sector.

"The industry should strike the right balance between demand and supply to strengthen the market this year. Residents in Dubai have shelled out a substantial amount on rents since 2011. However, rents have cooled in some parts of Dubai since the last quarter of 2015,"remarked Declan McNaughton, the managing director at Chestertons UAE.

"With the oil prices plummeting, the real estate market in Dubai may, in all likelihood, undergo a squeeze on prices and rents in the short term. The correction will be more of a normal real estate cyclical downturn of 15 to 20 per cent.  However, a lot depends on the impact of the external macro-economic factors and also how the UAE economy continues to perform,” he stated.

According to Chestertons, the price correction has been absorbed at different levels depending upon the location and type of property.

There has been a correction between 8 to 15 per cent  year on year (YoY) in villa properties. This is partly due to the current price trend and also future supply that the segment is expected to see once projects such as Jumeirah Park, Villa Lantana, MBR City, Arabian Ranches (Phase Two) are completed.

The supply could potentially double by 2020 and residents are expected to move out from older communities to newer communities as they are completed, it stated.

“Revised rental rates by Rera (Real Estate Regulatory Authority) are 10 to15 per cent lower than current market rentals. We expect the rental correction to be higher in secondary locations as supply increases,” revealed Declan.

“The risk with regard to excess supply is difficult to quantify, however, the number of units developed every year are on the rise. The residential property market currently faces the prospects of easing due to the upcoming supply factor and also the recent price correction in the industry. The market now needs to be closely monitored to avoid the challenges that it faced in 2008,” he said.

Robin Teh, the country manager for Chestertons UAE, pointed out that 18,000 units were delivered and over 2,000 villas were added in 2015 to the existing inventory.

"These units are expected to cushion Dubai’s rents that have soared since the last few years. Increase in supply will surely impact the market, particularly the new developments. The villa segment will also experience increased competition as more units are expected to enter the market by 2017," he added.-TradeArabia News Service




Tags: UAE | Supply | demand | housing rental |

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