Rents for the second quarter of this year were dropping at a slower rate than in the first and there was modest growth in some areas of the residential market, according to the report Cluttons Dubai property market update, Q2 2011.
Despite the events of the Arab Spring, Cluttons found that demand from Bahrain and Egypt has not yet been affected. It expects the effects to become evident in the market in Q3 and Q4 2011.
The market still faces the same downward pressure on rents seen throughout 2010, with rents in new business districts such as Tecom C, Busines Bay, Jumeirah Lakes Towers (JLT) and Dubai Silicon Oasis hit hardest in terms of price reduction. This year is expected to carry around 10 million square feet of office stock onto the market.
Whilst supply has increased hugely, there is still a shortage of good office stock and single-owner buildings outside of Freezone areas, suitable for businesses that hold a standard Dubai trade licence.
Dubai residential rates have continued to fall, but the rate of decline has slowed significantly, with apartment rental values falling between 3.5% to 10% on the first quarter of the year. The high-end villa market has proved to be more resilient and has counteracted predictions that prices would soften over the past quarter; in some areas rents have increased by approximately 1.5% to 3%.
Time will tell whether price recoveries are an anomaly or a sign that the market has reached the bottom, said Cluttons. In addition, it predicts that the summer months of Q3 2011 will bring a resistance to any growth in all sectors.