How the government is acting to mitigate impact of flooding on residents

Government mandate to developers to clean and repair houses for free will reduce inconvenience for residents, according to report by Cushman & Wakefield Core

A car is stranded on a flooded street in Dubai on May 2 as heavy rains returned two weeks after record downpours. AFP

The handling of the rise in water levels following the recent UAE rains by different community managers is expected to affect overall decision-making for buyers and tenants when looking at locations to buy or rent, according to a new report by property consultancy Cushman & Wakefield Core.

With the government mandating all developers and community managers to conduct the cleaning and repairs for residences free of cost, it is expected to alleviate inconvenience caused to residents, particularly in communities that have been severely damaged by the rains, the report said.

Long-term impact expected

“Climate change and the variability of rainfall across the region are expected to continue testing the limits of city infrastructure and the built environment, particularly given that Dubai is one of the driest global cities,” according to the consultancy.

“The April 2024 rains are anticipated to have a long-term impact on infrastructure planning, which is already seeing strides with the Dubai government approving a transformative $21.8 billion sewerage system plan that will serve the city population for the next 100 years.”

The storm on April 16 caused major disruption as roads and buildings flooded, transport services stalled and several businesses were forced to close.

People were stuck in offices and Dubai Metro stations, while passengers were also stranded at Dubai International Airport, where flights were cancelled because of the flooding.

Rents increasing

Residential rents in Dubai increased for the 13th quarter in a row, according to data from Cushman & Wakefield Core.

Citywide rents have recorded a 20 per cent year-on-year increase, while being 72 per cent higher than the first quarter of 2020 (pre-Covid19), the report said.

The Real Estate Regulatory Agency calculator, which was recalibrated on March 1 to be better aligned with open-market pricing, is expected to help reduce the disparity between renewals and new rents.

This is expected to inconvenience tenants as they face higher rents during renewals and may potentially lead to more movement in the rental market as tenants look to relocate due to no savings achieved during renewals, the report said.

However, the calibration of the calculator is expected to result in a sharp slowdown in disputes over rental increases, it added.

“Moreover, from April 1, Dubai landlords can seek rent revaluation only with a legal order,” according to Prathyusha Gurrapu, head of research and consulting at Cushman & Wakefield Core.

“Landlords in Dubai can still apply for a rent revaluation with Rera if they believe they are entitled to a higher asking rent than the one suggested by the updated Rental Index.”

Villa rents are starting to show signs of moderation, while the recent heavy rains exerted downwards pressure on rents in some of the heavily affected communities, the study found.

However, apartment rents continued to rise sharply and are mirroring the sales market trends, with the affordable and mid-market districts where the rises are sharpest.

Owing to their lower bases, Discovery Gardens rents rose by 35 per cent, Dubailand by 31 per cent, and Dubai Sports City by 30 per cent year-on-year, while rent rises in prime districts moderated, with Palm Jumeirah at 3 per cent and Downtown Dubai at 7 per cent annually, the report revealed.

More end-user purchases likely

“The rising rents and rental yield levels are also expected to trigger end-user purchases, particularly in the ready market, as mortgage costs are expected to moderate over the coming quarters, while rents are forecast to continue their upwards trajectory,” Ms Gurrapu said.

Citywide sales prices increased by 20 per cent annually, according to the report.

A contributing factor to the surge in villa sales prices, especially in older areas like The Lakes and Jumeirah Park, is the trend of renovating and reselling units at notably higher prices, thereby elevating the average price in the area.

The apartment market has recorded a moderation of sales price increases, particularly in the prime sub-markets including Palm Jumeirah, City Walk, Downtown Dubai and Dubai Marina, the report said.

Affordable and mid-market apartment communities, owing to a lower base, have registered a sharper increase of 30 per cent and above, as evidenced by Discovery Gardens (37 per cent), Dubai Sports City (34 per cent) and Dubailand (32 per cent), it added.

More than 8,351 units were handed over in the first quarter of 2024, while an additional 29,690 units are expected to be handed over between the second and fourth quarters, bringing the yearly forecast to nearly 38,000 units, according to Cushman & Wakefield Core.

Apartment project launches in Dubai surged by 22 per cent in the first quarter, while villa launch volumes declined by 30 per cent, the report said.

“Despite the sustained demand for villas, developers remain slower to respond to this surge, largely because of limited land acquisition opportunities,” Ms Gurrapu added.