Rents in Dubai continued to decline in August by as much as 30 percent but there were signs of stabilisation in some areas, Landmark Advisory said on Monday.
The real estate consultancy firm said the cost of leasing apartments in Discovery Gardens, International City, Palm Jumeirah, JLT and JBR fell by between 10-30 percent since March.
Worst hit were 2-bed apartments on Palm Jumeirah, followed by 2-beds in International City which have fallen 23 percent.
Rents in many areas of Dubai have decreased significantly over the past five months, but despite this, there are exceptions to this trend with some unit types in preferred developments performing well, the report added.
Apartments of good quality in Dubai Marina have increased by 11 percent for 1-bedroom units and by 6 percent for 2-bedroom units while 3- and 4-bedroom villas in Arabian Ranches and 3-bedroom villas on Palm Jumeirah have returned to March 2009 rents or increased marginally, Landmark's analysis showed.
Commenting on signs of rents increasing, Charles Neil, CEO of Landmark Advisory, said: "The increasing rents can be attributed to a lack of supply; many landlords have removed inventory from the market to avoid renting out at current market rates while others may be out of town during the summer period and consequently unavailable.
"We predict that the month of Ramadan will also affect the leasing supply as many landlords are waiting until Q409 to reassess the market."
The report highlighted that demand for property was particularly strong during June and July due to a significant amount of rental contracts ending around this time.
However, the marginal rent increase triggered by this was recognised as unsustainable by Landmark Advisory.
"The large amount of rents ending during the same period ultimately creates a temporary supply distortion following a period of particularly strong demand," added Neil.
Landmark predicted that most residential areas in Dubai will be subject to further fluctuation, especially as new supply comes onto the market in the next 12-24 months.
"If rents do come down further for these areas then we expect additional relocation demand as long as landlords adapt pricing strategies. Of course, this relocation demand will help to mitigate any further rental declines," said Neil.
The research also showed that relocation demand is continuing to drive the leasing market with demand still coming from Abu Dhabi and Sharjah as well as from within Dubai.
A continued upgrading trend is also evident with location, quality and size being the key factors for relocation demand.