According to the latest report from Asteco, an increased supply of high quality, affordable apartments led to considerable tenant movement across Dubai in Q4 2010, with many now upgrading to previously unaffordable properties that are larger and in more luxurious developments. Apartment rental rates fell by 3% in Q4 last year, which was the lowest quarter-on-quarter fall of the year and an indication that the market may soon stabilise.

The 17% drop in rents last year followed an even heftier fall of 24% in 2009, (totalling -37% from two years ago), and according to the report, International City has seen the largest drop due to tenants migrating to better quality developments in more desirable locations.

Rents are expected to continue their downward trend in 2011, albeit at a lower rate, as yet more new supply enters the market.

According to Asteco, the continuous delivery of new units has seen average sales prices in Dubai drop to $232 per square foot over the past year, while prices in International City and Discovery Gardens have fallen to just $95 and $123 per square foot respectively. Sales prices on Palm Jumeirah were flat in Q4 but command one of the highest prices at around $409 per square foot.
Abu Dhabi is following in Dubai’s footsteps and rents in the city, according to Asteco, fell by 7% in Q4 2010 alone, after hefty falls earlier last year.