Freehold areas in Dubai could witness even more declines in rentals according to market experts. Rental recovery may take up to a year and only for particular locations according to reports. Further drops in home rentals are expected across freehold clsuters in Dubai before the rents start stabilizing across some of the locations which are more popular in 2018. However, secondary location rentals will continue to face pressure according to a report from Core Savills.
Rental fluctuations do not really impact freehold demand hugely in Dubai. However, the recovery in sales values has been slower on account of this new trend. Rental yields have contracted overall but they still remain north of 7.5% for a majority of apartment districts in Dubai as per the report and around 5.5-6% for mid-segment villa districts which is higher in comparison to other investment types in this region.
However, to have a negative impact on prices and investors, the rental levels would have to go down by 25-40% from the current levels (depending on the area) in the future. This is an unlikely possiblity over the next 24 months at least according to the report. Zones like Jumeirah Village and Discovery Gardens should witness rental rate pressure building up as per the report. In case of the former, this could be due to higher upcomign supply while the latter will have communities that offer higher value for money propositions for tenants with improved amenities.
In case of more prime locations, Dubai Marina and JLT towers have positive forecasts for rental gorwth. The Jumeirah neighborhood should witness the most growth in terms of freehold segments. With other demand factors like a slight increase in job generation, a comparatively positive economic forecast and prices of stagnant oil hovering around $50 per barrel, mid-market sales prices still leave room for optimism according to the report. However, the present softening trend should continue in the prime category for some more time as per experts.
The Dubai real estate market has witnessed healthy performance in the first half of the year on account of growing investor interest and steady availability of end-users.