Sharjah rents are falling; this is why

Dubai - The increase in affordable housing in Dubai is having a negative effect on rents in the Northern Emirates .

Rents in Sharjah and Ajman are poised to fall further this year on the back an increase in affordable housing in Dubai, real estate consultancy Asteco said. John Stevens, managing director, Asteco, said he expects further rental declines in 2017 in the Northern Emirates if the supply of affordable property continues to stifle demand. Sharjah and Ajman are expected to experience more downward pressure on rates in comparison to Ras Al Khaimah and Umm Al Quwain.
Already, the increase in affordable housing in Dubai is having a negative effect on rents in the Northern Emirates with average rent levels declined marginally during fourth quarter 2016 in the with Sharjah, Ajman and Fujairah witnessing decreases of one per cent on average.
Over 2016, apartment rents in Sharjah fell three per cent, on average, with a typical one-bedroom apartment renting for around Dh31,000 per annum. This was not helped by the Sharjah Municipality's decision to increase the rent attestation fee from two per cent to four per cent of the annual rent, which resulted in a reduced number of tenant relocations and upgrades within the Emirate.
"However, to arrest the slide landlords in Sharjah have offered rent-free periods and more flexible payment plans (six to 12 cheques) in order to retain existing tenants and attract new ones. For example, the newly completed Sahara Tower offered rent-free periods in order to increase occupancy levels," said Stevens.
The availability of superior products also had led to a slight reduction in rates in more mature buildings as tenants upgraded to newly built accommodation, Asteco said. On top of this, continuous handovers of affordable units in Dubai have resulted in a reduction of relocations back to the Northern Emirates.
Apartment rates in Ras Al Khaimah fell, on average, by a nominal one per cent year-on-year, although there was a two per cent increase in master planned communities such as Al Hamra Village and Mina Al Arab, which outperformed mature apartment units due to enhanced product offerings and facilities.
"With the handover of more than 1,400 apartment units on Al Marjan Island, rental rates are expected to decline as better quality options will become available to tenants," said Stevens. Apartment rents in Ajman, on average, fell by two per cent year-on-year, with a typical one-bedroom property now renting at Dh31,000 per annum. Rents in Umm Al Quwain were unchanged year-on-year from 2015.
The commercial sector in Sharjah remained flat throughout 2016 due to a lack of demand for office space. Rental rates in the newly handed over Al Marzouqi Tower decreased from Dh65 per square feet to Dh55 per square feet. This was in addition to rent-free periods of up to three months offered by the landlord to encourage take-up.
"The Sharjah commercial market is expected to remain stable or, in some areas, show marginal rate declines during 2017 due to new supply combined with lacklustre demand for office space. On the other hand, the retail market in Sharjah and Ajman is expected to witness improvements with the handover of new supply such as Ajman City Centre, various retail outlets at Al Majaz Waterfront, and Zero 6 Mall," said Stevens.
According to real estate consultancy Cluttons, rents in Sharjah's residential and commercial property markets have fallen for a second year in a row, increasing tenancy options in the emirate. The Cluttons Winter 2016/2017 Sharjah Property Market Snapshot said tenants who are looking to get more for their money are moving towards Sharjah's more spacious communities or the significantly more affordable community spaces in Ajman. Faisal Durrani, head of research at Cluttons, said Sharjah's residential rental market has felt the impact of a falling market in Dubai.
"While Dubai should see a reversal in the fortunes of its residential markets in the autumn next year, any subsequent improvement in Sharjah, as has been the case historically, is likely to arrive shortly thereafter. Until we arrive at that tipping point, rents in Sharjah are likely to continue ebbing, with a further 5-7 per cent fall next year before things stabilise.
Property analysts expect increased supply of affordable housing in Dubai in 2017 as the potential for the sector is growing with more residents eager to own their own properties that are available through easy payment plans with installments for affordable home becoming almost on par with monthly rentals. 
- issacjohn@khaleejtimes.com