Many of Dubai’s most popular residential areas are seeing achieved rents continue to fall by up to 38% as new supply has led to landlords in new units undercutting market rates to achieve occupancy, according to Landmark Advisory.

Jesse Downs, director of research & advisory at Landmark Advisory, said: “Tenants realise it is currently a renters’ market and want more value for their rental dirhams.

“Some developers and landlords are finally realising the implications of this supply pipeline and are slashing rents by up to 20-30% below previous market rates in order to achieve higher occupancy in newly handed-over buildings. These properties are setting the new market rates.”

Developments which are suffering ongoing disputes over maintenance charges and infrastructure delays have been hit the worst, with studio apartments rents in Nakheel’s International City development down by 38% since June 2010 to AED16,000pa from AED22,000. In Dubai Marina, rents on quality two-bedroom apartments have plummeted 27% in the same period.

Downs said: “We estimate that average vacancy rates in Dubai are currently 15-18% but will increase to 19-24% by 2012. Even considering the Abu Dhabi commuter demand, it is clear that average rents in Dubai will continue on a downward trajectory.”

Landmark tracked three new Dubai Marina buildings in the three months from handover and discovered that those with a competitive pricing structure achieved occupancy of 90% within three months of handover, whilst in comparison the building with high rates and a rigid pricing strategy remained 60% vacant.