Dubai rents soared by more than 20% in the past year and the city could be facing another property bubble, warns the latest residential review from industry experts.
Apartments were the high fliers, recording a 21% increase year-on-year, while villas showed a 10% increase.
However, although rents have shown a significant increase over the year, recent trend is not so great, according to consultancy firm CBRE.
Quarter-on-quarter rent showed a much lower 3.2% average rise, suggesting prices are slowing.
Besides a split a gulf in the trend for rent rises between apartments and villas, rents also increased at varying rates in different suburbs, says the report.
Worrying cost of living
Highest rent growth was in Business Bay, The Greens, Sports City, International City and Motor City in the second three months of 2014.
“Increasing rents are representing the rising cost of living in Dubai,” said a CBRE spokesman.
“Inflation is worrying for many residents as they have triggered rent increases on almost 50% over the past 24 months or so.
“That’s the reason why rents are picking up in some previously more affordable neighbourhoods, especially as cost conscious expats who are often passing through on short term contracts are seeking cheaper and more economical accommodation.”
Apartment and villa sales are also picking up with a quarter-on-quarter rising trend of 5% on property values.
The increase is in the face of tough government action to tighten up mortgage availability and ward off speculators by increasing the costs of buying, the study disclosed.
Demand and supply mismatch
During the past year, property prices have increased by almost a third – and just like rents, formerly more affordable neighbourhoods like International City and Jumeriah Village Circle showed the largest jump in values.
The report warns that the supply of new property is not in synch with demand.
“More property is under development and coming to market every month,” said the spokesman.
“Not as many homes are being built as in the time leading up to the last property bubble bursting, it is expanding quickly and needs to be kept under review to discourage speculation and to match demand.”
Dubai will see another 17,000 new homes completed by the end of 2014, mainly in the non-prime Dubailand, Jumeirah Village Circle and Silicon Oasis neighbourhoods.
Developers have another 65,000 properties in the pipeline, of which 83% are apartments. The rest are townhouses and villas.
