Dubai commercial rents start to slow down

Rents in Dubai’s commercial real estate sector are showing the first signs of levelling off, according to research from CB Richard Ellis (CBRE), the world’s largest commercial real estate services company.

“We are seeing now for the first time a drop of commercial rental prices. Property purchase prices have been coming down for some time now, but rents had until now been holding strong,” managing director Nick Maclean said.

Prime rents in each of the three main commercial real estate sectors – industrial, office and retail, remained static in the fourth quarter of 2008, after a period of very strong growth since 2007.

Dubai retailers are blaming high rents in the city’s malls for prices that are now up to 50 percent higher than in Europe and North America.

No increase in rents -a bit relief

Rents for Dubai tenants whose contracts were signed in 2008 cannot be raised this year so long as the rent in 2008 is equal to or up to 25 per cent lower than the average market rate, according to a decree issued on Monday.

According to decree No 1 for 2009 issued by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, rents for both residential and non-residential properties in Dubai whose contracts were signed in 2008 cannot be increased in 2009 so long as the rent in 2008 is equal to or up to 25 per cent lower than the average market rate.

The new decree includes a mechanism to deal with low rents, where rents for the current year can be raised as long as the rent for 2008 was up to 25 per cent less than the average market rate.

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Mohammad Ebrahim Al Shaibani, Director of the Dubai Ruler's Court, said Shaikh Mohammad's decree aims to curb the soaring rents in Dubai and bring them to reasonable levels.

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Dubai's property bursts

"There is fear the worst is yet to come as a glut of properties arrives on the market. About 70,000 units are scheduled for completion in 2009, more than half were originally planned for 2008 or even earlier, according to a September report from EFG-Hermes. Buyers willing to commit to purchases before construction are harder to find now. Before the credit crunch, speculators accounted for 50 percent of the market." yousef abdulla

Banks have tightened lending or frozen it altogether. Amlak Finance PJSC, one of the biggest mortgage lenders in the UAE, announced on November 19 that it had suspended new home loans. London-based Lloyds TSB Group Plc stopped offering mortgages for apartments in Dubai on November 11 and reduced the amount it will lend for villas from 80 percent to 50 percent of the price. This has naturally had a negative effect on property values. For instance, in November, the cost of a seven-bedroom villa on Palm Jumeirah dropped to 19 million dirhams ($5.2 million), still an exorbitant price, down from 30 million dirhams in September, according to the Dubai unit of German real estate company Engel & Voelkers AG.

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Dubai population loss in 2009 estimated

The estimate by Swiss investment bank UBS that the Dubai population will decline by eight per cent in 2009, with a net loss of 8,000 per month, is proving highly controversial.
In the Emirates Business newspaper today the Dubai Naturalisation and Residency Department notes that in the past two months arrivals have far out numbered departures, with 86,000 arriving in December and 113,000 in November.

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60% Drop in Dubai real estate prices soon

Dubai real estate prices could fall as much as 60 per cent in 2009 from their peaks in July last year, while Abu Dhabi may slide as much as 20 per cent, Shuaa Capital said on Sunday. Real estate prices have fallen by around 40 per cent in Dubai and by around 15 per cent in Abu Dhabi from their peaks last year, Roy Cherry, vice president, research at the Dubai-based investment bank told reporters on Sunday, adding that rents in Dubai are likely to fall some 20 per cent in the next two years. “Dubai is seeing a negative growth in demand for real estate,” Cherry said

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