The average cost of renting apartments and villas in Dubai have fallen in the past one year and may fall further in the year, as the slowdown in job market is likely to dampen the tenancy demand.
As per the latest data from REIDIN, the rental prices in Dubai housing market dipped 5 percent in the past year, and by 2 percent in the first quarter of this year. The residential prices also showed 1 percent decline in the past three months.
According to Cluttons, such a trend will continue in the coming months, and an overall dip of 3 to 5 percent in rentals is likely.
The Head of residential valuations at Cluttons, UAE, Richard Paul, said that weakness in the job market tops the list of concerns, particularly, if there is spill-over into sectors beyond finance and banking.
Several companies have already announced job cuts and have tightened their recruitment activity, which further increases concerns that the slowdown may ripple through the rental market. Emirates NBD, for instance has announced 300 job cuts this month, as part of an internal restructuring strategy. Similarly other financial institutions like RAKBank, Standard Chartered, HSBC and First Gulf Bank have slashed their headcount.
The recruitment specialists have also confirmed that there were only few jobs on offer in the first quarter of this year, although sectors like healthcare have seen increase in recruitment.
Apart from employment slowdown, there are uncertainties pertaining to global economy, which is also impacting local real estate sector. Although the Expo 2020 may be a boost in confidence about economy, the results may materialize only by 2018.
With Dubai economy getting more intertwined with global economy, it will be largely influenced by the happening in the international arena, Paul said.
Moreover, further weakness is expected in China and the EU, and hence, turn-around in global growth is unlikely this year. Also, the impact of World Expo job creations to materialize may not happen until 2018.
But, according to some property analysts, Dubai or UAE property market has already stabilized and real estate activity may be poised to speed up. The real estate market sailed stably through first quarter, and there has been an even distribution and movement of residents from city centre to suburbs, says Bayut.com, the property portal.
According to these analysts, the real estate market is attaining maturity, and slight adjustments only add to the stability of residential sector in the emirate.