When will Dubai rental prices start to fall?

Real estate market experts from Better Homes traced the relation between sales and rentals in Dubai.

Despite the fact that decline in Dubai sales prices has become a major trend in recent months, rentals in the emirate kept growing fast. Better Homes has conducted a market study and found out, whether there is any connection between prices increase in one of these segments and prices decline in another.

While sale prices in Dubai were going down since the second quarter of 2014, rental prices kept increasing since then. And at the moment, according to the report, the average sale price per square foot of residential property in Dubai is about $353, while the average annual rental cost per square foot is about USD 24.

As for the future, analysts predict, that 20,000 housing units, which are about to enter the market in 2016, won’t have a significant impact on prices decline in rental sector, whereas sales sector is about to go even deeper below the current price levels.

“Sales prices are driven by a mix of rental yield, capital appreciation, payment plans, available financing, political risk, and so on; whereas rental prices are primarily driven by population growth and availability of properties, Ryan Mahoney, CEO of Better Homes explained.

“Renting is not a long-term investment in the way that purchasing is, so macro economics have less of an impact and it is primarily about the person’s immediate accommodation needs. As a result, rental rates do not necessarily track sales prices.”

Based on this, property experts, including analysts from Savills, Lookup and CBRE, predict that rentals in Dubai are unlikely to fall next year. Probably only a few fragmentary prices decline could take place in those areas, where massive new housing supply is expected, but even there the drop won’t be too sharp and significant.

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