Dubai’s expat community has been bargaining hard for rent discounts. According to research by JLL, in the last quarter of 2018, average rental prices for apartments were 11 per cent lower while rents for detached homes were down 8 per cent from the same period in 2017.
“Typically, colleagues and friends are getting close to 15 per cent off when they renew their rental contracts,” says Jason (not his real name), 61, a corporate writer for one of the Big Four accounting firms who arrived with his wife from Paris a year and a half ago.
The fall in demand owes much to Dubai’s faltering economy, thanks to regional tensions and the slide in oil prices since 2015, leading to job lay-offs in many sectors. In its March Dubai Economy Tracker, Emirates NBD, a local bank, reported that employment was falling faster than at any time since the survey began in 2010.
Jason noticed the lay-offs soon after he arrived, he says, with cuts focused in property sectors and among large international companies that use Dubai as a regional base.
This week, the government released figures showing the Dubai economy grew 1.94 per cent in 2018, its slowest rate since the 2009 debt crisis.
“You walk around shops and restaurants and there aren’t many people about. It’s no longer the boom time,” says Jason.
Nonetheless, Dubai continues to churn out new homes: 22,000 were completed last year, the highest number since 2013, according to JLL. No wonder sales prices continue to fall: by 8 per cent for apartments in the final three months of 2018, year-on-year; and by 9 per cent for detached homes.
JLL predicts 40,000 units will be completed in 2019, nearly double the number last year, meaning prices are expected to fall further — between 5 and 10 per cent in 2019 with no recovery until 2021, in S&P’s base-case scenario. “Since their last peak in 2014, prices and rents have fallen 25 to 33 per cent in nominal terms,” says Sapna Jagtiani of S&P in Dubai.
Popular spots for expats seeking apartments include Dubai Marina, the Palm Jumeirah and — further north, in the downtown area — around the Dubai Mall. Jason and his wife live in Dubai Marina.
“It is one of the few places in Dubai that you can explore on foot,” he says. The beach is a 30-minute walk and nearby amenities include restaurants, bars and supermarkets, including Waitrose and Carrefour. Jason has a one-stop commute from the nearby Metro station to his work in Jumeirah Lakes Towers.
There are plenty of bargains in the wider area. Savills is selling a one-bedroom apartment in Jumeirah Lakes Towers for Dh1.2m ($327,000).
A 10-minute cab ride to the north, overlooking the Emirates Golf Club and the Dubai Marina beyond, the same agent is selling a three-bedroom, three-bathroom apartment over three floors, with a maid’s room and a roof terrace for Dh3.9m.
For something grander, Knight Frank is selling a five-bedroom apartment in the Palme Couture Residences for Dh39.85m.
Local agents will hope that price falls are slowed by recent measures taken by the UAE government to entice new arrivals, part of a wider economic strategy to diversify the country away from oil-related industries.
New permits introduced last year included a 10-year visa for investors, entrepreneurs, executives and outstanding students as well as those who work in medicine, science or research.
The government also announced a five-year retiree visa: eligible to those aged over 55 who spend at least Dh2m on a property and have at least Dh1m in savings or Dh20,000 monthly income.
Interest from Chinese buyers, meanwhile, has picked up: Jagtiani says that developers are reporting increased sales to this group over the past 18 months, thanks in part to countries that imposed restrictions on foreign buyers.
New Zealand, for example, banned purchases of existing property by non-resident foreigners last year and some state and provincial governments in Australia and Canada now impose hefty buyer taxes on foreigners.
For the time being, Jason is looking forward to driving a hard bargain in October when his rent renews. The couple’s Saudi landlord has proved inflexible over dropping the rental price of their two-bedroom apartment, currently Dh155,000 per year, and they are planning to move. Given the recent falls, they have revised their budget down more than a fifth to Dh130,000.
Direct flights connect Dubai to Riyadh in two hours, to London in seven hours and to New York in under 13 hours
Property and construction each contribute roughly 7 per cent of GDP in Dubai, according to S&P
Total transaction costs for international buyers — who are restricted to certain areas — on a $2m home are around 6 per cent
What you can buy for . . .
$300,000 A one-bedroom second-hand apartment in Dubai Marina
$1m A three-bedroom apartment in Emaar Beachfront
$5m A three-bedroom house in Palme Couture Residences
Source: Financial Times