Villas in Sharjah have continued to buck the wider trend of retreating rents in the emirate’s residential rental market, recording an increase of 1.7% and taking the rate of growth to 0.4% during the last quarter of 2017, according to international real estate consultancy, Cluttons.

Cluttons’ Sharjah Property Market Snapshot for Spring 2018, shows that over the last two years, Sharjah’s villa market has grown in both profile and popularity as the real estate market repositions itself with new and affordable options. This trend is helping retain the emirate’s appeal and attractiveness amongst those households that have been priced out of Dubai, or are seeking a more family oriented lifestyle.

Suzanne Eveleigh, Cluttons’ Head of Sharjah, commented: “Communities such as Al Zahia have been a runaway success and with most major new shopping mall developments in Sharjah anchoring these new lifestyle destinations, the future of community living in the emirate appears relatively buoyant, especially when compared to many other property segments in the UAE.”

In contrast to the villa market, apartment rents in Sharjah registered a steep decline of 13.6% in rents, in the last quarter of 2017, compared to a decline of 10.6% in 2016, on average. Cluttons’ research shows that Abu Shagara topped the list of weakest performers, with rents retreating by an average of 15.1% during 2017.

According to the report, Sharjah’s residential rental market is set to face pressures from rising stock, which is helping to cement the tenant’s market that took hold three years ago. “Many landlords are reluctant to adjust advertised rents downwards due to concerns about alienating existing tenants. However, with tenants increasingly seeking out new and energy efficient buildings, reflecting household financial pressures stemming from the 1 January introduction of VAT, rising utility bills as subsidies continue to be phased out and rising inflation levels, we feel landlords will need to be flexible with rents and the payment plans, particularly in older buildings, to sustain demand,” added Eveleigh.

Faisal Durrani, Head of Research at Cluttons commented, “With sudden turnaround in economic growth, or residential demand unlikely to increase during 2018, Cluttons expect rents will continue to moderate, with apartments likely to see corrections of 5% to 7% next year, while villa rents are expected to experience growth of between 1% to 2%. This makes Sharjah’s villa market the only property segment in the UAE to see sustained positive growth. This is likely to prompt further investment in the city’s nascent villa segment, which will no doubt help reshape Sharjah’s residential landscape. ”

In Sharjah’s office market, rents have continued to stagnate, with no rise in advertised headline rates in any of the markets monitored by Cluttons. “While the stability in rents may suggest that demand levels are healthy, vacancies are rising across the board and the supply pipeline appears to be strengthening, with new schemes such as Sharjah Publishing City, Sharjah Media City and Aljada all set to inject fresh supply into an already saturated market over the next few years,” commented Eveleigh.

Durrani added, “Aside from the threat of a surge in commercial office space, which may be challenging for the market to absorb if it is not phased appropriately, there is the immediate issue of rising financial obligations for occupiers. The 5% VAT rate, for instance, is likely to take commercial occupier liabilities up to 14%, including the 4% Municipality Tax and 5% commission fee. With this in mind, our outlook for office rents remains subdued, with a fall in rates of between AED 5-10 psf, more than likely during 2018.”