Rent increases in the residential area in Dubai seem to have finally begun slowing down in particular areas.  Asteco’s quarterly Residential Report mentions that compared to the last quarter of 2007, annual rents have not risen significantly in the first quarter of this year.

Asteco, UAE’s largest property services company, was established in 1985 in Dubai. The company provides services such as research and investment, feasibility studies and valuations, commercial and residential sales and leasing, retail and strategic consultancy, property management and marketing. Asteco has been producing commercial and residential rental reports quarterly since 2006. These reports survey each emirate in the UAE.

Andrew Chambers, Asteco's Managing Director, states  “There are several reasons for this slowdown, including the recent availability of housing units, especially with the delivery of International City and the handover of several towers at Jumeirah Lake Towers and Downtown Burj Dubai. ... Needless to mention, the reduction of the rent cap from seven to five per cent has certainly had a desirable impact as well.”

Currently, Old Town Burj and Palm Jumeirah, Dubai, sport the largest rents.  A one-bed apartment costs AED 140,000, whereas a studio can be rented for AED 100,000. International City, with the lowest rental costs in Dubai, can cost less than half as much. A one-bed apartment in International City goes for AED 58,000 while a studio may be had for AED 42,000.

Whereas International City has the smallest rents for one-bed and studios, two-bed unit rents increased by 36% (from AED 70,000 to AED 95,000) in comparison with the same time last year.

“The rental increase seen at International City is mainly due to relatively fewer two-bedroom apartments available and, at that price, [we have] no guesses why the demand is high,” clarified Chambers.

Studios at the Greens saw a 31% average annual rent increase, from AED 65,000 to AED 85,000. Old Town Burj Dubai also went up in price. A one bed apartment's annual rent increased by 17%  (AED 20,000), while two-bedroom apartments increased by 21% (by AED 30,000 ) since 2007.  There were insignificant increases at Dubai Marina.

In the villa market, rental rates are related to the size, location, and condition of the dwelling. Arabian Ranches and Jumeirah offer four-bedroom villas at an average yearly rent of AED 300,000. Demand is high, and a vacant five room villa at Jumeirah (AED 450,000 to AED 500,000) would be promptly rented out by UAE nationals and ex-European. Jumeirah had the highest rates due to its proximity to the beach and the Sheikh Zayed Road. On the other end, Mirdiff had the lowest rates; its four-bedroom villa had an average annual rent of AED 175,000.  These prices represent no considerable increases over the last quarter.

Summarising the present situation, Chambers said, “Demand and supply will always determine the value of a property and as a result its rent. Rents in Dubai could not continue to soar. Prices will still increase but not at the phenomenal rate we have seen over the past three years. Residents and investors can rest assured that as more projects are delivered, the market will stabilise in the medium term.”