Dubai: Sharjah’s residents may be getting some respite on their rental outgo, with values dropping by 5.7 per cent in the first three months, based on a report from the property services firm Cluttons. On an annualised basis, the decline would be 8.3 per cent.
The Q1-16 drop should be taken in the context of a sharp 11.8 per cent gain that Sharjah home rentals witnessed in the first three months of last year. The current dip should then be taken as rental values finding more stable levels.
As was the case in Dubai last year and even in the current cycle, rents of villas in Sharjah are where the dip is most pronounced – by 13.2 per cent in Q1-16. Apartment leases were down 1.5 per cent in the same period.
Since 2013, Sharjah rentals had gained 25 per cent before the recent corrections.
If the slack persists, landlords will have a lot of catching up to do on getting their premises in order. And tenants are not willing to put up with shoddy living spaces. “We have already seen numerous instances of this being done during the last downturn in the market and it is these properties that are now fully let and in high demand,” said Suzanne Eveleigh, Cluttons' Head of Sharjah operations.
“This sentiment among tenants creates an opportunity for landlords to differentiate themselves by undertaking refurbishment and modernisation of properties while the market works its way through the current slowdown.”
But market sources are divided over the extent of the slowdown.
Some suggest that lower rents are only happening at those high-end properties that were leased three years ago and are now coming up for their lease renegotiation terms. “Those properties were carrying a higher rental premium because of the state of the market then,” said an estate agent.
“Those rents are not sustainable now and these are being brought back down. But older properties and popular neighbourhoods are still holding up despite the general cooling down of the market.”
According to the Cluttons Q1-16 update, the “number of tenants requesting rents to be left unchanged at renewal continues to rise. While it may be tempting for some landlords to make significant upward adjustments in cases where rents have been unchanged for a period of three years - in accordance with Sharjah Municipality regulations - there is an opportunity for landlords to honour such requests and avoid the risk of lengthy void periods, particularly as the market continues to soften.
“A handful of landlords have begun to recognise the deteriorating level of tenant demand and are leaving rents unchanged at renewal… however this is yet to become the norm.”
A lot will also depend on how many new homes will be delivered this year and the next. Some of the major developments in the emirate are still some time away from completion, including masterplanned communities. New tower launches have also come down in the emirate over the last two quarters. If weak conditions persist, the rental fall could average between 3-5 per cent for the full year.
“Rents across Sharjah’s more affordable areas remain symbiotically linked to the performance of Dubai’s rental market,” the report states. “With a weak short term outlook for Dubai, we do not expect to see any turn around in rental value growth until jobs linked to the World Expo in 2020 start to materialise, which we should start to see in the next 12 to 18 months.
“Until then, the rental market in Sharjah is expected to remain subdued.”
