More on property: Average housing rents in Dubai increased by more than 30 per cent over the past year and nearly 14 per cent over the first six months of the year.
Dubai housing rents rising faster than wages, CBRE report says
The increase in housing rents in Dubai is accelerating, rising 7.5 per cent between April and June alone.
According to a report published today by property broker CBRE, average housing rents in the city increased by more than 30 per cent over the past year and nearly 14 per cent over the first six months of the year.
The increase last quarter, CBRE says, was driven by a rapid increase in rents in secondary locations like Dubai Sports City and Jumeirah Village as tenants priced out of Dubai's most expensive locations look to relocate in more affordable accommodation.
Rents for a two bedroom apartment in Dubai Sports City rose by a massive 20 per cent over the three months from Dh55,000 to Dh70,000 per annum while those in Jumeirah Village increased from around Dh60,000 to Dh65,000 per annum.
CBRE said that landlords in the new masterplanned areas were also benefitting from improvements in infrastructure and facilities which had enabled them to raised prices.
It said that rents were rising faster than wages amid an economic recovery as factors including companies hiring new staff and the emirate's rapidly increasing property prices stoke demand.
The inflation rate rose to 0.8 per cent in June, the Dubai Statistics Centre said in earlier this month. Food prices increased 6.7 per cent while transportation costs rose 6.6 per cent, the report said. In the month, prices increased 0.5 per cent.
According to the CBRE data the average rent for a villa in Dubai rose 5.8 per cent over the quarter while apartment rents rose by 9 per cent.
An average 2 bedroom villa in the Springs rose from around Dh110,000 a year in the first quarter of the year to around Dh125,000.
It added that the rapid rental increases could eventually put new residents and companies off coming to the UAE.
"The residential sector is showing increasing signs of overheating with lease rates rising far too quickly to be justified by the current economic environment, as rental growth significantly outpaces growth in wage levels," said Matthew Green, head of research for CBRE's Dubai office.
"The result is the rising cost of living, which could start to impact on Dubai's competitiveness if sustained at current levels for too long."
The news comes as brokers continue to warn that property prices in the emirate are rising out of control and are beginning to spark fears that the market could return to bubble conditions.
Nonetheless, Mr Green added that rents for apartments in Dubai still remained 40 per cent below their level when the property market peaked in 2008 while the average villa rent today remained 20 per cent lower than the market peak.
Office rents in the city centre remained static over second quarter of the year at Dh1,500 per square meter a year, CBRE found as the Dubai market continues to struggle to absorb a massive over supply of space left by the last recession.
The agent predicted that rents in prime locations would start to grow over the second half of 2013.
Office rental rates are expected to see further growth over the remainder of the year, while the amount of inferior strata accommodation will also continue to rise, pushing down rents on secondary offices.