For tenants in the city's prime developments, the long era of reasonable rents appears to be drawing to a close. But for those willing to relocate, there are still many bargains, Sean Cronin reports
Dubai tenants have enjoyed almost four years of falling or frozen rents after the market was flooded with thousands of new homes.
But a long, hot summer awaits tenants as costs in the city's best developments inch higher and renters switch from trading up to trading down.
Landlords have already started to raise rents in the best locations, with residents of the Palm Jumeirah, Emirates Living and Arabian Ranches feeling most of the heat. The trend is leading some analysts to ask if the increases are too much too soon.
"I am fearful that the green shoots of recovery are going to be trampled on by greedy landlords," says Mario Volpi, the sales and leasing manager at Cluttons in Dubai. "There is a lot of sensationalism. I read today that Jumeirah Beach Residences apartments have gone up 20 per cent in the last couple of months. How can that be? I don't believe it for a minute."
Still, the data does point to a strengthening sales and rental market in specific, sought-after locations and mainly, but not entirely, focused on villas. The rest of the market faces tougher times.
Sales prices in the Emirates Living cluster of housing developments have posted the strongest gains, according to Cluttons. Sales prices at The Lakes development have advanced more than 7 per cent from the end of last September. Both The Meadows and The Springs have jumped more than 6 per cent during the same period.
Rents are also increasing, although not at the same pace. The average annual rent for a one-bedroom apartment in Downtown Dubai stood at about Dh70,000 (US$19,056) in the first three months of the year - or 5 per cent higher than the previous quarter, according to research from Asteco. The broker estimates that the value of a similar home in Jumeirah Lakes Towers (JLT) gained 3 per cent to Dh45,000 over the same period.
The good news for those willing to relocate is that there are still many developments where prices remain static or continue to fall.
Apartment prices at Nakheel's vast Discovery Gardens development have dropped by 7.8 per cent since September, while International City, another Nakheel development, has lost about 5.6 per cent, according to broker estimates.
Some of the cheapest units are in the city's hinterland projects of Dubailand, International City and Jumeirah Village, where about 6,000 villas and townhouses are being built.
Located off Dubai's Emirates Road and adjacent to the sought-after Emirates Living collection of communities, Nakheel's Jumeirah Village project illustrates the divide opening up between the city's prime and secondary locations, which often sit next to each other.
A 3,300-square-foot, three-bedroom Mirabella townhouse with maid's room can be rented for just Dh85,000 a year in Jumeirah Village South, according to the propertyfinder.ae website, which lists homes for sale and rent. But just across the road in The Lakes, a smaller three-bedroom villa is being advertised at an annual rent of Dh210,000.
The price divide is equally visible between Dubai Marina and JLT, separated by Sheikh Zayed Road and connected by a three-minute walk across a Metro overpass.
The most expensive two-bedroom apartments in the Dubai Marina cost about Dh250,000 to rent for a year and are in The Address tower. That is almost Dh100,000 more than the priciest apartment of similar size in JLT across the road, to be found in The Bonnington tower.
But the widespread availability of cheaper options for tenants willing to trade down to secondary locations is not convincing landlords in primary spots to hold back from raising rents. That may not bode well for a market where many landlords are under acute financial pressure to make the most of rising demand.
"Every day we think we have agreed a deal - then another agent tells the [owner] they can get them more money and the deal falls through," says Mr Volpi of Cluttons. "We don't want this roller-coaster ride. All that will happen is buyers and tenants will walk away and the bubble will burst again."
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