More than 3,100 new apartments are scheduled to hit the market in Dubai Marina in the next four months, putting further pressure on declining rents in the popular coastal district.
Location, location, location:
Industry Insights What's hot and what's not in the world of property. Learn More
Rents for lower-end apartments in the area are already down 10 per cent in the fourth quarter from the same period a year ago, according to research by Asteco Property Management.
Prices for top-quality apartments are stabilising, but "poor accommodations will struggle" as new towers open, said John Allen, the director of research for Asteco.
The additions to the Marina include 697 apartments in the Elite Residences tower and 763 units in Princess Tower. Both towers are scheduled to open by March, Federico Tauber, the president of the developer Tameer Holding, said yesterday.
The 414-metre Princess will be the tallest residential tower in the world.
Select Group, a rival developer, is in the process of turning over three buildings in the Marina with a total of 1,700 apartments, including the 348-metre The Torch, currently the tallest residential building in the world.
Select is also preparing to hand over the 41-storey Botanica, which features botanical gardens on the 27th floor, and Bay Central, a three-tower project with 735 apartments.
Most of the apartments in the new towers were sold at the peak of the market, and a large percentage of those are likely to be offered for rent.
"Assuming half come on as rentals, it is going to put extra pressure on rental rates," said Craig Plumb, the head of the research for Jones Lang LaSalle. "Older buildings are likely to see rental drops to fill up vacant units."
The new towers will provide more choices for renters, including people already living in the Marina.
"In central locations people will trade up to better buildings," Mr Plumb said. "The new buildings will give people more choice in the Marina … to move around."
There are already about 90 completed residential buildings with 30,000 apartments in the Marina, according to Asteco research. Another 6,300 units are expected to be completed by 2015, Asteco forecasts, although several projects are stalled.
At the top end of the market - ranging from studio apartments renting for more than Dh50,000 (US$13,611) and three-bedroom units at more than Dh125,000 - rents have fallen 6 per cent in the past year, less than at the lower end of the market, Asteco's latest data shows.
Tomorrow's exclusives tonight:
Industry Insights e-newsletter Get the pick of out premium Business content direct to your inbox. Sign up
Dubai Marina and Palm Jumeirah remain the most popular areas for renters keen on coastal living, said Michael Michael, the director of sales and leasing for Landmark Properties.
"In terms of living that lifestyle, it's the Palm and the Marina," Mr Michael said.
In the higher-quality apartments, "a lot of landlords have already reached the rock bottom in terms of what they are willing to lease", Mr Michael said.
Apartments in the Princess and Elite are still up for sale, after about 20 per cent of the original buyers defaulted on their payments, said Mr Tauber of Tameer.
"In the higher end, there was some speculators in the market," he said.
Apartments in the Princess are selling for an average of Dh950 a square foot, compared with about Dh2,300 a sq ft at the height of the market, he said.
Sale prices for apartments in Dubai Marina have fallen by between 7 and 12 per cent in the past year, depending on the size of the apartments, Asteco reports.
twitter: Follow and share our breaking business news. Follow us