Dubai rents have fallen sharply in the last two months, with going rates for some real estate ranging from basic studios to luxury flats on the luxurious man-made Palm Jumeirah falling by almost a third, a property consultancy said on Thursday.
Landmark Advisory said rents have fallen as much as 50 percent in some areas since peaking last year, with average declines of 10 to 30 percent depending on the neighborhood.
Between March and May, rents on studio flats in Dubai Marina, an upmarket district dominated by white-collar workers, fell 23 to 28 percent to between 40,000 dirhams ($10,890) and 65,000 dirhams per year, data from Landmark showed.
Rents in Dubai, home to an indoor ski slope and the world's tallest tower, doubled or more during a building boom that came to an end late last year after the financial crisis hit.
"We expect an additional dip in the summer with the anticipated departure of groups of Dubai residents," Jesse Downs, Landmark's director of research and advisory services, said late on Wednesday. "We're definitely seeing more supply coming online and a population declining in Dubai."
Most Dubai landlords require tenants to pay the full year of rent upfront, although some allow two to four installments.
A Marina studio now costs $907-$1,475 a month, down from $1,180-$2,043 a month in March.
Dubai Marina rents have fallen an average of 23 percent from the third quarter to the end of April, while in nearby Jumeirah Beach Residence, prices have declined 19 percent, Downs said.
Renting a two-bedroom flat on the Palm Jumeirah, an island shaped like a palm frond and visible from space, was 14 to 33 percent cheaper in May than it was in March.
That puts annual rent at between 120,000 dirhams and 175,000 dirhams, or $2,723-$3,972 a month in May compared with $3,178-$5,901 in March.
Renting a one bedroom flat in the Greens, a medium-income housing complex, also fell 25 percent to a lowest price of $1,362 per month, Landmark said.
Rising house prices were a main driver of inflation in the United Arab Emirates in recent years, with price rises peaking at a 20-year high of 13.6 percent in 2008, economists say.
The pace of declines in rents, as well as lower food costs, has led many economists to slash their 2009 inflation forecasts.
"The very rapid expansion in demand that pushed rental prices up so sharply in 2007 and 2008 has come to an abrupt halt," said Simon Williams, regional economist at HSBC, who forecasts UAE inflation will fall to 5 percent this year.
"That downshift is being reflected not just in lower rents but downward pressure on prices for a range of goods and services."
EFG-Hermes expects the number of Dubai residents to fall 17 percent in 2009 as companies slash jobs by the thousands. Hundreds of billions of dollars in UAE expansion projects have been shelved.
Slumping demand would drag residential real estate prices down between 50 and 60 percent this year from their 2008 peaks, EFG said in a research note on Wednesday. The market is unlikely to recover before some time in 2011, it said.
Downs, meanwhile, said a growing number of people living in neighboring emirates including Abu Dhabi and Sharjah were now renting in Dubai to take advantage of falling rates. Many people live in Sharjah and work in Dubai to save costs.