(MENAFN- Khaleej Times) With the number of people relocating from Dubai to Sharjah expected to drop this year, there is the prospect of a decline in rents in the emirate, real estate experts said.
Subsequent to a softening of rents in Dubai that has effectively put the brakes on tenant migration, experts predict a potential correction in rental rates for both Sharjah and Ajman in 2015.
Another impact of a decreased level of migration of tenants from Dubai is that more residential units will remain vacant in Sharjah, analysts at Asteco said in their latest regional overview report.
According to the report, the outlook for the Northern Emirates' real estate market in 2015 is set to follow the general UAE trend.
Dubai's rents, which had soared by up to 65 per cent since 2011, are projected to soften with the expected supply of an estimated 14,000 new residential units in 2015. Dubai residential property market also faces the prospects of softening of sales activity due to the new supply.
"A muted year is on the cards in terms of market movement following a modest 10 per cent average rental increase in Sharjah, Ajman, Ras Al Khaimah in 2014," said the report titled "UAE Property Review 2014 Highlights & 2015 Outlook."
"The Northern Emirates' real estate market, and particularly Sharjah and Ajman, has traditionally been characterised by strong interdependence with Dubai due to overflow demand. That scenario peaked most recently in the first quarter 2014 and with the current slowdown in Dubai, which has effectively put the brakes on tenant migration, a potential correction in rental rates for both Sharjah and Ajman is anticipated in 2015," said John Stevens, Managing Director of Asteco.
Fujairah and Umm Al Quwain, however, are unlikely to see much change for the year ahead, as they are less inter-related with Dubai.
Strong levels of growth and high occupancy levels throughout the Northern Emirates were recorded in first half of 2014, but the second half of the year saw downward pressure on leasing rates, which were already around 50 per cent cheaper than similar properties in Dubai, and even 60 per cent more affordable in Ajman. "Some tenants had also relocated to cheaper accommodation within the Sharjah borders as certain landlords were unwilling to negotiate rental rates," the report said. Sharjah and Ajman have historically seen less dramatic swings in rental rates over the last six years, with apartments on average 16 per cent and 17 per cent respectively lower in fourth quarter 2014 than the peak rates achieved in 2008, said the report.
A two-bedroom apartment in Sharjah's Al Khan area was leasing at Dh65,000 per annum in 2008 before hitting a low of Dh33,000 in 2012 and increasing to Dh53,000 per annum in the final quarter last year.
The announcement of the new Tilal City project, which was supported by new property ownership legislation from the Sharjah Government allowing expatriates from any country with valid UAE residency to purchase property within this development on a 100-year leasehold basis, has provided a much-needed boost for the emirate and an exciting new opportunity for investors, said Stevens. "Several stalled projects were also restarted last year. These include the Bermuda Villas at Mina Al Arab in Ras Al Khaimah, the Ajman Pearl and the luxury Al Zorah master planned project by the Solidère Group," he added.
The popularity of a number of high profile sea and golf course-fronting master-planned communities in Ras Al Khaimah, including Al Hamra Village, Mina Al Arab and Marjan Island, is also expected to hold firm this year according to Asteco, with the report forecasting stable levels of demand from both sales and leasing as these communities become more established, resulting in marginal rate increases.
According to Asteco, Ras Al Khaimah had a relatively good year in 2014, as a good value-for-money option with a selection of quality properties available at reasonable prices, and regulatory transparency on property ownership promoting strong demand; whereas Sharjah's sales potential is still stymied to a certain degree by the absence of clear ownership regulations.
Further stagnation in the office sector is similarly forecast for Sharjah in 2015 with rental rates expected to remain flat
"Office leasing rates in Sharjah have been relatively stable since 2011 with only marginal fluctuations and two per cent growth in 2014.
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