Dubai residential rents hold up as property prices fall

Dubai home rents are holding up, helped by demand from residents of neighbouring emirates, while property prices continue to fall because of oversupply, Deutsche Bank AG said.

Apartment rents rose 1.1 per cent in March, compared with the previous month, analysts Nabil Ahmed and Athmane Benzerroug wrote in a note to clients dated April 9. Villa rents climbed 1.3 per cent during the same period, according to the note.

“We probably underestimated, a year ago, the amount of migration from the other emirates to Dubai that has created a lot of demand,” Ahmed said in a phone interview on Sunday. “A lot of people upgraded for better properties” and many moved to Dubai from Sharjah and the Northern Emirates. Many Abu Dhabi workers live in Dubai to take advantage of cheaper quality housing, he said.

Dubai’s property prices slumped as the financial crisis forced companies to cut jobs, and dismissed workers had to leave the country within 30 days because of the employment laws of the country. UBS AG had estimated an 8 per cent decline in Dubai’s population in 2009 and said that would contribute to a doubling of vacancies as new homes were placed on the market. About 90 per cent of Dubai’s population is expatriates.

Average apartment prices declined 1.1 per cent and villa prices slid 1.7 per cent in March compared with the previous month, the analysts wrote, citing the Deutsche Bank proprietary price index, which covers 13 main locations in Dubai.

“While monthly data are volatile and should be reviewed cautiously, we note that the stability has continued for almost eight months now,” the analysts wrote. “The marginal decline could be a consequence of new supply, as evidenced by the most affected locations,” such as Business Bay and Sports City, they said.

Dubai’s housing glut and lack of financing are the main impediments to any meaningful recovery in the property market, according to the report.

Emaar Properties PJSC, the United Arab Emirates’ biggest developer and the builder of the world’s tallest skyscraper, is the analysts’ top pick. Emaar offers highly discounted multiples compared with emerging market peers, the report said.