The state backed developer Nakheel is set to release another 26 buildings to buyers in Dubai’s International City, totaling around 1,663 units, and this is likely to push rents in the beleaguered development even lower, according to a report in Arabianbusiness.com.
International City is a project aimed at low and middle income groups, and rents are already under pressure at around AED 15,000 a year for a studio apartment. According to real estate experts the addition of more units across the market will enable occupiers to move to better specified homes at the end of their rental lease, often at very little or even no extra cost. There have been frequent complaints about the standard of infrastructure at International City and the close proximity of a sewage processing plant.
Local real estate agents have warned that if rental values decline any further it wouldn’t be worth an investor purchasing property in the development, and landlords would need to offer incentives such as rent free periods in order to attract tenants. There is also the worry that Nakheel could lease the flats directly to tenants, undercutting landlords and causing rents to drop even further. Earlier this year the developer offered rent-free periods at both this development and its Discovery Gardens in an effort to attract tenants, and experts think rents could drop by another 10% to 15%.
Nakheel has been one of the hardest hit property developers. In August it split from its parent firm, Dubai World to become state backed, and in September wrote down $21.4 billion from its real estate values, and the company is now concentrating on completing existing projects having already handed over more than 1,180 homes across the emirate in the last year and a half.
Elsewhere in Dubai things aren’t quite so bad, as Jones Lang LaSalle found the property market had begun to show small signs of recovering as prices of prime property and the number of transactions increased in September.