As you all know we are the only company dealing exclusively with the Palm so we should be able to give a good upto date commentary on what is happening with Palm apartments and villas.
The last month, from a rental perspective, has seen enquiries for both types increase from the previous month. There has been a healthy amount of closed deals and May 2010 was our best month to date for rentals on the Palm.
I think the most important things to analyse are:
- How many deals are being done?
- What percentage of lets are fresh tenants versus "house hoppers"
- What level of rent is being achieved and its percentage gain or drop.
- How much new inventory is being added to the register. - This one is critical
The first three questions above can all be answered in a positive manner which would enable a normal market to thrive. The biggest is problem is the amount of new properties coming to the market.
On the Palm Jumeirah we have 400 more Oceana's to be handed over in the next few weeks, The Fairmont Residence in the next month, and 3 buildings at the Golden Mile. That's a lot of new stock which you can add another 500 Marina Residences to.
It really is all about the new inventory and what i have just described for the Palm can be duplicated across all the major developments of Dubai.
A year ago, when Tiara was launched, rental prices for this development held quite firm and actually increased over the first 6 months of launch. It is a quality product and only 300 units were released for rent and the demand was high enough to keep them bouyant.
A year on and Oceana, which is virtually the same product, is now seeing its rental prices drop. A one bed Oceana was rented by us 4 weeks ago for 140k per annum and now you can find them for 120k. This is a big drop and suggests that the landlords are trying to beat the market and ensure they get a tenant before there is so much stock that prices reduce again.
The reports from the advisory firms do have substance and it is true that apartment prices, even on the Palm, are seeing a pressure downwards. In contrast, there are no new villas being built and prices here are very stable. I don't think they have dropped in the past 12 months and because tenants stay for around 3 years in villas stock levels are limited.
The Palm will fair much better than the rest of Dubai over the next 2 years and i predict that occupancy levels will be high, and significantly higher than the rest of Dubai. This is because people do want to live on the Palm and as prices ease existing Dubai tenants will be able to move onto the Palm and benefit from better pricing.Due to the fact that there are 40,000 units to be handed over before Xmas I am sorry to say that this trend has started and Landlords are going to see this affect their revenue streams. This must continue for atleast 2 more years and my advice to all landlords is to offer a well maintained property and look after your tenant to the point where they want to renew for a second year.
The Palm is settling down very well and as Nakheel slowly gets back on track The Palm will still be the palce to be and live. I hope the maintenace of the Shorelines and Clubhouses can be improved soon as it this kind of service that will help maintain the rental levels.
It is going to be a rocky couple of years in Dubai and the rest of the World but quality will prevail at the end of the day.
