When the property boom was halted in its tracks late last summer, the sprawling tower blocks in Dubai Marina became the target of people looking to take advantage of the substantial drop in rents. But while rents in the rest of the city continue to fall, the Marina has shown signs of recovery, triggered by its popularity among those looking to upgrade where they live.
Rents in the Marina area, on the outskirts of new Dubai on the road to Abu Dhabi, rose as much as 11 per cent over the past five months, while leasing rates in the rest of the city plummeted by up to a third, according to a study by the property consultancy Landmark Advisory. For example, the average rent for a two-bedroom flat in Palm Jumeirah has fallen by a third to Dh140,000 (US$38,110) a year, the study said. In International City, similar flats were available for Dh60,000, a fall of 23 per cent over the period.
At the Marina, however, rents increased by an average of 11 per cent for one-bedroom apartments and six per cent for two-bedroom units. In March the average rent for a one-bedroom flat in the Marina was Dh87,500. Now people would be charged Dh97,500 on average, while two-bedroomed flats that previously rented for Dh117,500 now cost Dh125,000.
Among the reasons given by Landmark and other estate agents is the fact that construction in the Marina area is almost complete, and some landlords have chosen to take their homes off the market to limit supply and drive up rents later in the year.
Asad Sawani, a financial analyst at Landmark Advisory, a division of Landmark Properties, said the Marina was a popular choice because of the quality of apartments, the range of shops and restaurants and the fact that much of the construction work had been completed. "It's location. The fact that it is close to Abu Dhabi and that they can get more for their money and the commute is not too bad," he said. "Dubai Marina is more complete than other areas and it has high quality apartments. Some other areas are still under construction." The Marina has retained its popularity despite the increased expense. But if prices continue to climb, the area could lose its appeal, house hunters warned. "I am surprised that prices are going up in the Marina. I think there are still bargains out there but they might just be harder to find," said Keyhaneh Kavoosi, 35, from Germany, who has worked in Dubai for the last two years while living in Sharjah.
"If prices get too high I will have to look somewhere else - maybe Dubai Festival City or Business Bay." Ms Kavoosi has been looking for a one-bedroom flat in the Marina for the past two months. "Sharjah is too crowded and the Marina is a much nicer place to live. There are shops and restaurants. It is closer to where I work," she said. Heloisa Ruiz, 17, from Brazil, moved into a two-bedroom flat in the Marina with her mother a month ago. They had been sharing an apartment with friends and moved into a place of their own to take advantage of tumbling rental rates earlier in the year.
"I agree that prices here aren't falling now like around the rest of the city," she said. "The Marina seems to be the only place where the prices are staying the same." According to the study, International City is the cheapest place to rent a one-bedroom flat, at an average of Dh45,000. It also has seen the greatest drop in rents for one-bedroom apartments since March 22 per cent owing in part to the availability of cheap, higher-quality homes nearer the city centre.
Palm Jumeirah is the most expensive area for one-bedroom flats, at Dh100,000, which represents a 20 per cent drop since March. Discovery Gardens saw the smallest change in rental rates, with one-bedroom flat rents falling by 12 per cent and two-bedroom flats decreasing by 10 per cent. Charles Neil, the chief executive of Landmark Advisory, said the rental rate increases in Dubai Marina were a consequence of a tightening of supply, as landlords removed their properties from the market to avoid leasing them at lower rates.
"Many landlords have removed inventory from the market to avoid renting out at current market rates while others may be out of town during the summer period and consequently unavailable," he said. "We predict that the month of Ramadan will also affect the leasing supply as many landlords are waiting until [the fourth quarter of the year] to reassess the market." Andrew Chambers, director of Asteco, the UAE's largest property services firm, said the Marina's increasing rental prices were probabaly due to its location on the west side of Dubai, which made it attractive to people living in the city but working in the capital, combined with the fact that construction on the development had all but ended.
"The commuter factor is one reason why I expect rental levels have risen. It is convenient for people travelling between the two cities," he said. "It is also a pleasant place to live. It has a completed road network, power, water and a large number of shops and restaurants." He also expected the Old Town district around the Burj to become increasingly popular as most developments in the area were slated to be completed by December.
However, Iseeb Rehman, the managing director of the property firm Sherwoods, expected rental prices in the Marina to fall soon as more apartments became available. "We have seen rents continuing to soften in the Marina and expect them to continue to fall during the next year as there are around 20,000 housing units due to come online in the next 12 months." He added that many of these were in the nearby Jumeirah Lakes Towers.
Villa rental rates across Dubai also slipped, according to the Landmark study, with only Arabian Ranches recording an increase. Rents for three-bedroom villas rose by six per cent to Dh175,000 since March while four-bedroom villas recorded no change, remaining at Dh225,000. The area to find the cheapest villa was Mirdiff where the cost of three-bedroom buildings fell by 26 per cent to Dh115,000 and four-bedroom villas fell by 31 per cent to Dh140,000.
Palm Jumeirah was the most expensive location. Prices there remained at Dh300,000 - the same level as in March. firstname.lastname@example.org