ABU DHABI // Dubai residents are moving house to take advantage of rental bargains in the city, estate agents said yesterday. Tenants who were previously reluctant to change homes due to a shortage of accommodation, and a lack of rent caps in new contracts, are now seeking better deals as their leases near expiry. Some are even willing to walk out on existing contracts and sacrifice deposits in exchange for homes that have become cheaper since the completion of thousands of apartments in Jumeirah Lakes Towers, International City and Discovery Gardens.
"People are moving from one part of the city to the other, especially those who rented at prices very much above current market rates," said Rose-Marie Kilzi, the leasing director of Great Properties, a Dubai-based estate agent. "They are looking around about two to three months before the contract expires to see if they can find something cheaper." Camilla van der Merwe, head of leasing at the property services firm Asteco Dubai, said numerous tenants nearing the end of their leases are contacting the company in search of bargains, while those in no hurry to move are waiting for a further dip in prices.
Although there is no statistical proof that rents in Dubai have declined this year, a recent Asteco report found that rates for flats and villas remained unchanged over the past three months of 2008. A comparison of prices between Dubai's rental index, which is based on figures for last year, and those advertised now reveals a difference of up to 30 per cent in areas such as Arabian Ranches, Dubai Marina and Discovery Gardens.
Liz O'Connor, the director of residential sales and leasing at Better Homes, said the lower end of Dubai's rental market has shown the most activity this year. Non-freehold areas such as Qusais, Bur Dubai and Satwa have held their rental values, she said. "Many tenants are downsizing as a result of pay cuts or accommodation allowances being reduced or cancelled," she said. "There also seem to be fewer families coming into Dubai. We are seeing a higher demand for studio, one and two bedrooms as opposed to three, four and five bedrooms."
Some residents are following a different strategy, moving to bigger homes in newer areas of the city to take advantage of depressed prices, said Myles Bush, director of PowerHouse Properties. "Six months ago we had two-bedroom Springs villas at Dh180,000 to Dh190,000. You can now get one at Dh140,000," he said. Ms Kilzi said a client had moved from a one-bedroom flat in Jumeirah Beach Residence worth Dh120,000 to an apartment in Al Barsha that was twice as big, but only Dh15,000 more. The client is sharing her new home with a work colleague and saving about Dh50,000 per year on rent.
David Hammett, a Briton living in Bur Dubai, said he had wanted to move nearer his place of work at Dubai Internet City, but had been put off by last year's rents. "I've found a two-bedroom flat in Jumeirah Lakes Towers for Dh117,000 and I'm keen to move, but I've paid for my current place until late April," he said. "I just hope those prices are still available then." Despite the slowdown in rental inflation, housing officials in Dubai said the emirate still offered good rental returns of seven to 10 per cent of the value of the property, compared to two to three per cent in other countries, he said.
"There will be a correction but it won't go to two to three per cent," said Marwan bin Ghalita, chief executive of the Real Estate Regulatory Agency. Meanwhile, Mr Bush said the leasehold market has continued to be active, despite the fall in new arrivals to the emirate. Only 88,432 residency visas were issued in last month, compared to 93,957 in January 2008. People were more likely to rent property than to buy due to falling house prices and the difficulty in securing mortgages. Villas on the Palm Jumeirah that were up to Dh16 million six months ago are now valued at about Dh7m, said Mr Bush.
"The last few months have been pure rentals," he said. email@example.com