Dubai: Has the rise in residential rents in Dubai reached its peak?
Sure, new rental contracts as well as renewals come at higher lease rates, but more landlords are now not getting their asking prices. And willing to negotiate a rental agreement at a lower sum.
This trend is starting to show up more forcefully in recent leasing deals, and across communities and popular residential locations in Dubai. If the trend persists through the final four months of 2023, it would mean that after three years of high-powered growth, rents in Dubai are starting to stabilize. But not cool off.
Even then, that still represents relief for Dubai’s growing resident base, with many of them having had to shell out between 10-30 per cent more as rent than what they would have paid in 2019-20. And for the city’s new residents too, any levelling off on what they have to pay as rent would come as a big break as they settle down into their new homes in towers and communities.
This is what Asteco, the property services firm, has to say about rental trends – “There are signs that they may be reaching a ceiling. One such indicator is the difference between listing (rental prices) and (actual) contracted rates, as recorded by the Dubai Land Department.
“According to the data, apartment and villa units are often renting at the lower end of the (asking) range, despite the fact that they are not advertised as such.”
In other words, landlords are being realistic enough about what they should reasonably be expecting. Some industry sources had been saying that further turbo-charged growth in rentals would have meant the property market overheating.
Where are rents leveling off?
Areas that have recorded ‘significant levels of new supply’ - Meydan (where the Azizi community Riviera is spreading out), the Arabian Ranches 3 and Al Furjan, had ‘nominal or no rental growth’, according to Asteco.
Even where there was low availability of units to lease and limited tenant movement in locations such as Dubai Silicon Oasis, the Jumeirah Beach Residence towers, and The Greens and Views, there have been only ‘above-average increases’.
Other industry sources also cite mid-market locations in the city also experiencing a slowdown in rental increases. More projects are to be handed over in areas such as Jumeirah Village Circle, Dubai South (and its Expo Village), which are opening up options for existing or new tenants to seek more wallet-friendly rentals for their next 12-month contracts.
“A lot of tenants had locked in their rent renewals or leases before their summer trips, and these will be reflected in market trends soon,” said an estate agent. “From the leasing we had done, the majority came in lower than what the landlords had asked for.”
There are ways this could change all over again.
- If there is another rush of first-time residents in the UAE over the coming weeks, putting sudden pressure on the housing supply and availability;
- If there is any slowdown in the pace of new homes getting completed and handed over; and
- A sizeable number of landlords get it into their mind that they should try their chances with short-term leasing.
How many homes were delivered year-to-date?
Nearly 11,000 residences were delivered during Q2-23 is what Asteco estimates, with more than 9,000 being apartments. “The pace of supply is forecasted to further increase with close to 20,000 completions planned for 2024-25,” says the Asteco report. “We understand that several developers are seeking to accelerate their construction programmes with the aim of bringing handovers forward by 3-6 months.”
Now, that can be quite decisive in deciding rental trends in the short-term.
More to follow…