Dubai: More tenants in Dubai are taking the easiest option when rents are soaring –stay put. Rather than shift to new homes and the much higher rentals that come along with it, residents are extending their current leases.
It shows in the latest residential rental transactions. “The Ejari renewals (with Dubai Land Department) are taking up a larger share of registrations,” said Jean-Pierre Mondalek, CEO of houza.com, the property portal. “Between May 1 to July 25, 53 per cent of rental registrations in Dubai were renewals vs. 45 per cent in the same period last year.”
Nearly all of the mid-to-prime neighbourhoods in Dubai have gone through 20 per cent rental increases on new leases since early 2021. At some of them, the rate of increase keeps accelerating. “With significantly higher prices and tight supply, more tenants have chosen to stay put, negotiate and extend their current lease rather than choosing to enter the competitive rental market,” said Tinicia Hepworth, Director of Leasing & Short-Term Rentals at Betterhomes Group, and also a listing partner at houza.com.
Whether it’s Downtown Dubai or a new building in Deira, asking rents are treading higher. Current listings for a two-bedroom at Downtown shows rates from Dh130,000-Dh140,000 and can go a whole lot higher on the upside. Buildings within the Deira Enrichment Project near the Corniche are leasing two-bedrooms closer to Dh80,000, while at some of the more affordable neighbourhoods, the asking rate is around the Dh55,000 mark.
Even current leases have hikes, but...
This is the reality for those tenants wanting to extend their current contracts – landlords are asking more. But estate agencies say, if the tenant were to balance the cost of moving out with staying put, the latter option would make more sense. In most cases.
“With rents rising by over 20 per cent across Dubai, for many, it makes more sense to stay put or accept the RERA Rent Index increase as opposed to going into the open market and paying far more than they otherwise would,” said Mondalek.
Based on market feedback, on existing contracts, landlords are demanding between 10-25 per cent higher on average. “The biggest plus shifting to a new rented premise is the two-year lock-in provided,” said an estate agent. “It made sense when rents were starting to increase last year. But now, having to pay that additional 20-30 per cent is forcing many tenants to reconsider a new place.”
For those investors with new homes to be delivered and rented out, this could be a worry. They may have been making plans about netting a higher rental income as rents keep climbing. But now, they face the reality of many potential tenants not in the mood to shell out 20-30 per cent more.