Apartments are now the choice for most Dubai residents, with prices in some areas rising 240 per cent since 2005.
Villa lifestyle slipping out of reach
The chances of renting a modestly sized house in Dubai for less than Dh200,000 a year has all but ended, putting the emirate's idyllic villa lifestyle out of many people's reach. Two-bedroom villas in popular communities such as Arabian Ranches, The Springs and The Meadows are being priced by estate agents and on online forums at between Dh200,000 (US$54,440) and Dh280,000 a year.
With three and four-bedroom houses typically renting at more than Dh300,000 and Dh400,000 respectively, it now costs about Dh100,000 per bedroom to afford the house and garden lifestyle that many residents seek, the same price a two-bedroom villa rented for almost two years ago. Many couples planning to start a family or who have young children say they have no choice but to adjust their expectations and seek accommodation in apartment complexes such as International City, Dubai Marina and Jumeirah Lakes Towers.
Medhad Ibrahim, an Egyptian living in Sharjah, who will soon get married and plans to raise a family near where he works in Dubai, said: "I don't want to bring up my children in an apartment. I want to let them have a garden to play in, but I have no choice. Not all of us are on monthly salaries of Dh20,000." Vincent Easton, the sales director at Sherwoods Independent Property Consultants, highlighted a case where a newly arrived family in Dubai had expected to secure a villa, but soon realised that their Dh120,000-a-year housing allowance fell Dh100,000 below the amount required.
The view of Dubai as an essentially villa-based community has given way to an acceptance that life in an apartment is the most feasible option, added Ryan Mahoney, the managing director of Better Homes. Mr Mahoney said the average rent for a two-bedroom villa in Arabian Ranches had climbed 241 per cent since 2005. Although rent increases in Dubai are capped at five per cent, there is no restriction on increases for contracts with new tenants. The Dubai Government has yet to announce next year's rent cap law, but there are rumours it will set benchmark rates throughout the city.
Despite the lofty rates, Dubai's limited number of small villas are still in strong demand, indicating that prices still have not reached their peak. "We've got a few [two-bedroom] villas in The Springs for Dh200,000, but you need to move very quickly for them," said Mr Easton. A search on the website dubizzle.com for yesterday's listings of two-bedroom villas for rent in Dubai revealed only six available properties, two of which were priced just below Dh200,000 a year.
Although local estate agents each listed dozens of villas for rent, very few were below the Dh100,000-a-bedroom figure. Two-bedroom villas in The Springs typically started at Dh220,000 and were priced from Dh250,000 in Arabian Ranches. Although villas were available in Al Barsha, Palm Jumeirah, Green Community and Jumeirah Islands, they were mostly larger and more expensive. Only the completion of hundreds of villas and townhouses at Nakheel's Dh5 billion (US$1.36bn) Jumeirah Village project is expected to ease the supply shortage of modestly sized houses.
The continuing upwards pressure on rents comes despite reports that the Dubai housing market is going through its first period of trauma since foreigners were permitted to buy freehold property in 2002. Average villa rentals in October were 11 per cent higher than in June and climbed the highest in Downtown Burj Dubai, which saw a 25 per cent rise, according to a third-quarter report published by the property services firm Asteco.
The company said the average price in October for a four-bedroom villa was Dh375,000 and Dh465,000 for a five-bedroom home. However, there were minimal rental increases in Jumeirah and Umm Suqeim due to there being no new supply and little tenant movement. "Analysts keep saying the market is falling and prices are dropping virtually 50 per cent, yet you can't find accommodation at a realistic rent," said Mr Easton.
"This reinforces our view that the market is healthier than is being reported and is merely suffering short-term jitters as investors get caught in the turmoil of the international credit crisis. "If prices do correct, it should follow that the rental prices correct at the same time but we're seeing no sign of that, simply because demand is still outstripping supply." Companies will be unlikely to increase salaries or allowances during the global economic slump to make villas affordable to a wider selection of people, said Mr Mahoney.
According to research by Better Homes, the rental rate for a two-bedroom villa in The Springs has climbed 166 per cent since 2005 when the average price was Dh65,198. A two-bedroom villa in Arabian Ranches rented for Dh66,667 on average in 2005 and has since climbed 241 per cent, the company said. firstname.lastname@example.org