Sharjah: Renter’s market

Sharjah’s real estate sector is a buyer’s and renter’s market at the moment, with prices falling since the beginning of the year and more residents reporting satisfaction with the affordability of housing. Increased residential and office space competition from neighbouring emirates, however, means that maintaining occupancy rates will be a challenge, at least in the near term.

Sharjah’s property market is to a large extent shaped by supply and demand factors from neighbouring emirates, with a report on the UAE property market from real estate consultancy CB Richard Ellis (CBRE), for example, noting that a 28% drop in rents in Ajman was in part driven by competition from Sharjah, where residential rental prices have fallen by around 21% since the beginning of the year.

Not surprisingly, Sharjah’s renters are pleased with the situation, according to a survey conducted by the Abu Dhabi Gallup Centre (ADGC) that was released at the end of August. The results of the study, which examined the satisfaction levels of UAE nationals on a range of issues, including the affordability of housing, showed that there had been a strong improvement in sentiment among Sharjah residents.

According to the report, 54% of local respondents were happy with the affordability of housing, higher than the national average which was 51%. The 2011 findings for Sharjah were a contrast with the results of the same survey last year, when the satisfaction level was just 33%, and also better than the 48% registered in 2009.

Another factor in favour of Sharjah’s real estate sector is that while rental costs in other emirates may have fallen, they are still high when compared to those elsewhere in the region, and indeed in a global context. Mohamed Younis, a senior analyst at ADGC, told local media that Abu Dhabi and Dubai, for example, continued to be “among the most expensive ‘high-cost-of-living’ cities around the globe”.

But while renters may be pleased with the current situation, property owners are having a tougher time of it. The trend of rent reductions is expected to continue through to the end of the year, CBRE said, as new housing stock appears and owners increase efforts to entice tenants.

“As competition intensifies, many landlords in Sharjah have started to include parking and chiller charges [district cooling charges] within their quoted lease rates,” the report said. “In some cases agent commissions on initial lettings are also being ignored.” The quality of facilities is another area of competition, with the report noting that the expanding inventory of new towers has increased movement away from ageing buildings that lack the latest standard of amenities.

Despite efforts to entice renters, some residents are taking advantage of the reduction in prices in the Dubai market, encouraged by the growing availability of quality accommodation at more affordable prices – at least in comparison to those in the past. According to Matthew Green, the head of research and consultancy for CBRE UAE, “The performance of individual emirates continues to fluctuate widely, with Sharjah and Ajman currently feeling the brunt of Dubai’s overhang of space.”

It is not just residential rents that are declining, with CBRE saying office lease rates in Sharjah fell by 22% in the first six months of the year. Average lease rates are currently in the range of Dh300-Dh700 ($60-$140) per sq metre per year, down from the Dh430-Dh860 ($86-$172) level of the second half of 2010, representing a drop of around 22%, CBRE said.

Though Sharjah’s property owners may see lower rates of returns on their rental units for some time yet, the market should rebound in the medium term, as the UAE and global economies recover. With GDP growth for the year now pegged at 3.3% and 3.8% for 2012, according to the IMF, and a recent report from Citigroup noting that regional unrest may result in “significant tailwinds” for the UAE, that looks likely to happen sooner rather than later.