In the UAE, tenants are looking for higher-quality properties. This is causing increasing rents in new and Grade A buildings. But, rents in older and lower-quality buildings are struggling, particularly in Sharjah.
Due to a shortage of units in the ultra-luxury category, rents continued to rise in some areas of the UAE last year. Many expatriates moving to the country in the post-pandemic period were a key cause of this. Yet, after a significant increase in the last few years, rents are now stabilising.
According to Savills, leasing activity remained stable across Abu Dhabi. But most inquiries were from tenants moving to higher-quality units.
RENTS IN DIFFERENT CATEGORIES
In the apartment category, Saadiyat Island saw the largest increase of 36.8%. This was then followed by Al Reem Island (11.1%) and Al Reef (3.3%). Rents in Al Raha Beach remained steady.
In the villas/townhouses segment, Saadiyat Island topped again with a 36.8% jump in rents. This was then followed by Al Reef (7.7%) and Al Raha Garden (6.9%). Rents in Hydra Village and Gold Gardens were steady.
JLL also predicted the delivery of 2,000 units in 2022 in Abu Dhabi. Savills expects a significant amount of residential supply in Sharjah that will be handed over in 2023 and beyond.
SEGREGATION IN THE MARKET
According to Savills analysts in the 2023 report, there is a growing segregation in the market between high-quality projects and the rest of the market. High-end projects have seen robust demand, with occupancy levels estimated to be more than 90%. Due to strong demand levels, good quality stocks command a premium over the rest of the market.
IMPACT ON OLDER PROPERTIES
Savills predicts that the new supply in Sharjah will negatively impact older properties in the secondary market. So we may start seeing an increase in vacancy levels and rental correction as tenants and end-users move to newer developments. Yet, across good-quality Grade A assets, rental values should stay stable.
THE FUTURE OF UAE REAL ESTATE
Real estate experts predict that the UAE real estate market will continue to grow in the coming years. There is also a strong amount of new supply entering the market too which will help maintain an attractive market.
The UAE real estate market continues to be an attractive option for investors, with increasing demand for better quality properties driving rental values higher. The growth of the high-net-worth population in the UAE has been a key driver of this demand in the real estate market. While the market is facing challenges in terms of vacancy increase for old and poor-quality buildings, the future looks promising, with a significant amount of new supply expected.
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