The rental market in the real estate sector of UAE will soften further this year, due to the increasing demand-supply gap. Focus has to be on affordable housing sector, as this will further help industries to maintain sustainable growth levels, states Chestertons, the global property agency.
The expert has called upon developers to therefore consider projects within the affordable segment range to further support this sector.
The industry should strike the right demand-supply balance if the market has to be strengthened further this year. Already, the Dubai residents have spent considerable amount on rentals since 2011, although rentals have narrowed down in some parts of Dubai since the last quarter of 2015, said Declan McNaughton, Managing Director, Chestertons UAE.
He further said that as the oil prices continue to dip, the real estate market in Dubai, in all its likelihood, may undergo shrinking on prices, and rentals, in the short-term. The correction will be more of a normal real estate cyclical downturn of 15 to 20 percent.
Depending upon the location and type of property, the price correction has been absorbed at various levels depending on location and type of property. The price correction has been in the range 8 to 15 percent year-on-year in villa properties, partly due to current price trend, and future supply which the segment is likely to see when the projects like Villa Lantana, Jumeirah Park, MBR City, Arabian Ranches (Phase Two) are completed.
The supply may potentially double by the year 2020, and residents are likely to move out from older communities to newer ones, as they are completed, it said.
RERA’s revised rental rates are 10 to 15 percent lower than the present rentals in the market, and the rental correction may be higher in secondary locations with increase in supply, said Declan.
The risk, with regard to surplus supply is to quantify, but, the number of units developed annually are on the rise. The housing property market now faces the prospects of easing, due to forthcoming supply factor, and the recent price correction in the sector. The market now needs close monitoring to avoid the challenges that it saw in the year 2008, he said.
The Country Manager for Chestertons UAE, Robin The, said that about 18,000 units were delivered and more than 2000 villas were added last year the existing inventory.
The units are likely to cushion rentals in Dubai, which have soared over the past few years. Increase in supply will surely bear an impact on the market, particularly the new developments. The villa segments will also experience stiff competition with increasing number of units likely to be delivered into the market by the year 2017, he pointed out.