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Special Report

Is it the right time to rent a bigger and better house in Dubai, Sharjah, UAE?

Rental rates in UAE, rights of tenants and landlords and all about buying and renting



One of the COVID-19 created disruptions of 2020 was that villa rentals turned ‘affordable’, with landlords seeing overnight vacancies happen because their tenants’ job situation might have changed as a result of the virus fallout.
Image Credit: Shutterstock

Rent hikes or dip in UAE always prick the ears of residents. Realty prices have been reasonably steady for a while, offering brighter prospects for tenants. Is it the right time to shift to a bigger flat/villa in the UAE or wait a bit is the larger question. Here is a quick look before you make that decision.

Dubai residents take note

The city’s residential areas did not see any rental increases since the start of 2021, nor are they likely to see increases any time soon.

However, an across-the-board hike in residential rents was starting to emerge as a potential worry for tenants, after four years of a steady drop in what their landlords were charging them on new leases or renewals. In 2020 alone, there were areas in the city that saw rents dip by more than 10 per cent, and the impression was this would continue through this year and even into 2022.

But, of late, there are locations where rents are back on the rebound, and taking just about everyone by surprise at the speed at which this happened. The Palm is a clear example of where demand for super-luxury homes are running far ahead of available supply, and to a lesser extent at Downtown Dubai too. Palm homes were securing Dh1 million plus a year rents without the owner/estate agent breaking into a sweat, and just recently another deal was concluded for an eye-popping Dh4 million. Another upscale enclave, Dubai Hills, will also be seeing steady rent gains.

Will these rent gains sweep across Dubai?

So far, there is nothing to suggest what’s happening on the Palm or Dubai Hills will soon be reflected in all of the city’s residential spots. New leases are entered where tenants get to pay less than what they did in the previous 12 months.

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Image Credit: Vijith Pulikkal/Assistant Product Manager

Lynnette Sacchetto, Director of Data and Research at Property Finder, is sure that a city-wide rent increase is not happening any time soon. In fact, “rental declines will continue across the board - except for villa/townhouse communities and at prime areas like Dubai Marina and Downtown,” she said.

And the reason for that belief? “Let's look at supply, to date we had 27,000 units completed in the first six months compared to 46,000 units last year,” said Sacchetto. “Rents will most likely start to stabilize in areas where supply was scarce, especially in areas like Dubai Marina and Downtown.”

Which are the most affordable spots in Dubai?

For someone wanting to bring down his/her rental payments down further, Dubai South currently offers the most affordable options, according to Property Finder data. A one-bedroom 880 square feet apartment is listed at Dh28,000 while for studios, even brand new ones, the rents are less than Dh20,000. Even with the Expo starting next door, rents at Dubai South are unlikely to see a sudden rise because of the sheer number of new homes being delivered there in the next 24 months. However, short-stay rents in and around the Expo 2020 venue is seeing some increase, but that was to be expected ahead of the Expo 2020 opening in October.

Image Credit: Vijith Pulikkal/Assistant Product Manager
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Silicon Oasis is the other residential spot that fits in well for tenants who want to keep their rental expenses manageable. Sports City is seeing more buildings and apartments delivered, and that should keep rents in check. At Sports City, a one-bedroom rent is in the mid-Dh30,000 for a furnished unit, while in Silicon Oasis, the asking rate is from Dh30,000 a year.

“Even though the overall rental trend in Dubai is moving up, not all areas in the city are performing the same,” said Alina Adamco, Secondary Market Sales & Leasing Director at Metropolitan Premium Properties. “Some areas like Dubai Sports City (-1.23 per cent), Dubai Silicon Oasis (-1.58 per cent), Discovery Gardens (-2.60 per cent), Liwan (-2.96 per cent), Remraam (-0.39 per cent) and Dubai South (-3.13 per cent) have seen rates dip further in the past month, following a 5-10 per cent decline in the last quarter. As usually happens during a market recovery, the central and coastal areas of the city have seen a fast price correction while the emerging areas are following the trend.”

Sudden rent increase demands, what tenants should do?

Unlike at any time in the past, residents in Dubai have legal rights when confronted with rental increases beyond the norm. “Dubai does allow a rental increase - provided at least 90 days' notice is given to tenants,” said Marwan Al Sheikh – CEO at Medait Star Real Estate. “After all, owners of residential - or commercial - properties do have the right to increase rents periodically by 5-10 per cent annually or every two years.

“There are however exceptions, such as if the tenant would stay at the same property for a longer period. However, this should be a mutual agreement between the tenant and the landlord.

Image Credit: Vijith Pulikkal/Assistant Product Manager
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“As per Dubai tenancy law, a 5 per cent rental increase is allowed if the current rent is between 11-20 per cent less than the average rent [in that neighbourhood]. But if the current rent is up to 10 per cent lower than the average of similar units, then a rental increase is not allowed.”

The regulatory guidelines are there – and it’s for the tenants and landlords to make sure these are adhered to. The fine print is clear – landlords cannot try and burden their tenants with unexpected demands citing a market upturn happening around them.

Tenant rights in Dubai are protected whatever be the status of the market. Under all circumstances, tenants should be aware of their rights as per the emirate’s rental laws.

Prepare to pay extra for villas/townhouses

One of the COVID-19 created disruptions of 2020 was that villa rentals turned ‘affordable’, with landlords seeing overnight vacancies happen because their tenants’ job situation might have changed as a result of the virus fallout. It led to those homes being listed again at rates that were 15-25 per cent off on the earlier contract. There were quite a few residents who made good use of those offers, as COVID-19 created another trend in the local property market – the need for bigger spaces and, where possible, a bit of green as well.

Try getting those kinds of deals now, and you are bound to be disappointed. The rent gains are not confined to pricey homes on the Palm – villa communities across Dubai are feeling the boost in demand, and the subsequent rent increases.

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“The villa and townhouse communities are in strong demand among families relocating from apartments or from one gated community to another,” said Adamco. “Values in areas like Emirates Living, Arabian Ranches, Reem and Town Square have grown by 2-3 per cent in the past one month.

“Areas like Dubai Investment Park Villas (up 4.5 per cent), Jumeirah Park (5.49 per cent), Living Legends (7.28 per cent) and MBR City townhouses (8.97 per cent) have seen strong demand and price increases. This is quite beneficial to investors and reflects on rental yields.”

Image Credit: Seyyed de Llata/Senior Designer

Rent or buy property in UAE?

More residents in Dubai and the other emirates in UAE believe it is the ideal moment to buy. The trend is already apparent in Dubai, given the huge demand that is there for newly-completed homes or older homes that their owners want to sell. Mortgage-backed deals are in the high 30 per cent range in the first six months of data, and which is often taken as a proxy for end-user interest.

Developers have in recent weeks been issuing offers all over the place: pay up to 10 per cent and move into a new home, pay up the rest over three or five years.

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“If there is enough mortgage support from banks and developers play their cards well, the next 6 to 12 months will see more residents willing to finally buy and move into a new home,” said a real estate broker. “The mood among buyers is to get into a new home – more space, greener – at the earliest rather than book and wait for their off-plan home to be built and delivered in three or so years.”

Yes, interest rates will start climbing once again from their current all-time lows, and which means mortgages will cost extra. Yet, these will not burn holes in buyers’ pockets for a long time to come, given that rate increases will be gradual and stretched out over a wider expanse of time.

Will Sharjah rents stabilise soon?

Unlikely, going by what’s been happening over the first six months, when rents continued to dip at all of the popular residential areas. In its latest update, online property finders Bayut-dubizzle notes that Al Nahda was the “most preferred choice for tenants” searching for rental apartments, followed by the waterfront neighbourhood Al Majaz.

The asking rents in Al Nahda dipped 4 to 8 per cent in the first half of the year, averaging Dh16,000 for studios, Dh21,000 for one-bedroom apartments and Dh28,000 for two-bedroom apartments. As long as Sharjah apartment rentals remain under pressure, residents do have options to scout around. The areas in Dubai adjoining the Sharjah border too remain a budget-friendly option, with building facades still sporting big signs citing ‘For Rent’ offers.

Shaping Dubai’s next upscale community

The Dubai Creek Harbour has all the obvious attributes to be the city’s next need-to-be-there neighbourhood, with prime waterfront spots and luxury towers. Retail options are also part of future attractions.

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“I like to call these ultra-prime areas,” said Sacchetto. “Like the Palm or Emirates Living, these will behave differently compared to the rest of the Dubai real estate market. Areas that have thrived since H2- 2020 had very low supply and very high demand. The Springs has seen a 30 per cent increase year-on-year and Meadows 14 per cent, according to government sales transactions on Data Finder.”

When it comes to Dubai Creek Harbour, which Emaar is building in association with Dubai Holding, the first six towers rentals average Dh65,000 for an 850 to 900 square foot one-bedroom apartment and Dh100,000 for a 1,400 square foot two-bedroom apartment.

“The apartment sizes are slightly smaller, there are no appliances provided and the landlords are competing with each other to rent their apartment faster,” said Adamco. “A one-bedroom apartment of 670 to 750 square feet is between Dh45,000 to Dh50,000.” That’s what one would call ‘affordable luxury'.

Sharjah property market grows

Sharjah developers have got their design concepts and sales pitch just right: more living space and green at highly competitive prices, especially when compared to what similar homes would cost in Dubai.

The projects are getting more ambitious and greener. A prospective homeowner can choose between an extensively landscaped Dh24 billion Aljada development or opt for the ‘forested’ look of the Masaar, both from Arada. Or if the choice is for a community within a few minutes of a mega-mall, then it’s Al Zahia for you, from Majid Al Futtaim Properties.

Yes, with each quarter, there are more investors and end-users getting into Sharjah’s property market, with newly-created residential communities being highly sought after. And even tenants are heading there, eschewing apartment living for the promise of open surroundings.

“Many attractive new options are appearing in both emirates (Dubai and Sharjah), particularly along the E311 and E611 corridor,” said H.P. Aengar, CEO of Asteco, the property services firm. “These communities offering extensive retail and leisure facilities are inevitably attracting tenants from more established communities.

“There has been a flight to quality within Sharjah itself, where newer and often better-quality developments are being handed over. Sharjah is a community with its unique characteristics and will always have a market.

"Its appeal is not limited to price. However, tenants everywhere have become more discerning and, accordingly, landlords of older properties are increasingly offering incentives or reducing rents to retain their tenants and attract new ones.”

Image Credit: Vijith Pulikkal/Assistant Product Manager

Falling rents in Dubai and Sharjah

Rents in Dubai and Sharjah have fallen by around 40 per cent since 2014, according to Asteco estimates.

“The pandemic wasn’t the only factor,” said H.P. Aengar of Asteco. “The large volume of new building supply has also played a role, though it is fair to say that residents of both emirates are now enjoying the fruits of this hectic building activity, the UAE truly offers an outstanding choice when it comes to rental property.

“The communities in Dubai which proved the most resilient during the pandemic include DIFC, International City and the Greens/Views, though even there, rents fell around a third from their 2014 peak,” said H.P. Aengar.

42% drop in Sharjah rentals since the first quarter of 2015

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