DUBAI (Reuters) - An economic rebound has catapulted house prices and rents in Dubai to Manhattan-like peaks, the Gulf emirate’s top property website says, forcing increasing numbers of residents to move to its cheaper outskirts or even to consider returning home abroad.
Rents fell 1 percent in the third quarter after 10 straight quarters of price rises, property consultants CBRE reported this week. But the sustained cost of living surge has driven hundreds of families to relocate to smaller homes on the fringes of the opulent, highrise urban canyon that soars out of empty desert.
Research by Dubai website Dubizzle showed rents and house prices in Dubai’s prime locations now match those in Manhattan.
“We’re talking about $2,000 to $3,000 (a month) for a rental in Manhattan,” said Ann Boothello, property product marketing manager at Dubizzle, which attracted 2.4 million monthly visitors to its property pages in the third quarter.
“For a one-bedroom apartment in Manhattan it would be about 1.9 million UAE dirham ($517,388), which would be the same for a prime community here.”
Dubai rents and house prices are estimated to have increased broadly by some 30 percent year-on-year, the highest growth rate in the world during the first half of 2014, according to various studies, while in some areas price rises have been much steeper.
Middle- and low-income expatriate families have suffered most from rocketing rents, often including Indians and Pakistanis as well as expatriate Arabs and also some families from affluent Western states.
Construction workers usually live in company accommodations but their families remain in their home countries.
The property market in the city of 2.3 million people rebounded in the last two years after a more than 50 percent plunge in home prices from their peak in the aftermath of the 2008-09 global economic slowdown.
The oil-rich Gulf sheikhdom’s reputation as a solid safe haven in a Middle East increasingly torn by political upheaval and civil war has lured tourists and foreign investors alike.
Costs have kept rising and the emirate jumped to 67th spot among the world’s most expensive cities to live in the world compared to the 90th position last year, according to the 2014 Mercer cost of living survey.
The leap in living costs was attributed in part to a significant increase in expatriate rental accommodation costs.
Some rents in the Dubai marina, for example, jumped by more than 50 percent between August 2013 and February 2014.
“I don’t save a thing,” said Abdul, a 33-year-old website programmer from Bangalore, India who declined to give his full name. He relocated with his wife last December to Remraam, a new development built by Dubai Properties 30 km (20 miles) inland on the desert periphery of the city.
“We moved out here because it was the cheapest area, but it will probably go up (in price) next year and we will have to move out of here too,” said Abdul.
“We will probably move back to India next year.”
At an annual property exhibition in Dubai this week, state-linked companies announced projects they estimated to be worth billions of dollars combined. Among the units on display were mansions in central Dubai priced at 75 million dirham each.
“There’s been an exceptional amount of interest for these mansions,” said Ajay Rajendran, vice chairman of Sobha Group, which is developing the project.
The increase in activity is causing many - including the International Monetary Fund - to worry that the Dubai market is overheating.
A senior government official said on Sunday that rising inflation needs to be controlled to ensure Dubai remains affordable. [ID:nL6N0RM0EL]
The government has introduced some measures like increased transfer rates and mortgage caps to control prices.
These figured in the slight cooling of the market in the third quarter with average residential rents falling by 1 percent, their first decline since 2012, a CBRE report said.
(1 US dollar = 3.6729 United Arab Emirates dirhams)
Editing by Mark Heinrich