Dubai: After the Palm and Dubai Hills, the Downtown and Dubai Marina could be the next two popular residential locations in Dubai that could see rental increases – for the first time in nearly five years.
This could happen “by year-end and with the Expo around the corner,” said Lynnette Abad, Director for Research & Data at Property Finder. The Downtown and Dubai Marina had been through double-digit rental drops in the last two years – but new leases are either holding steady or actually seeing some sort of increase.
“Another [tenant] segment that could be affected will be those who rented a new property or renewed their existing rental during the hardest times of the pandemic and received discounted pricing. We are starting to see landlords wanting to regain some of their losses by increasing rents upon renewal.”
For tenants at some of Dubai’s most sought-for neighbourhoods, it’s new reality they are having to deal with. The years of steady drops are coming to an end.
But so far, most of the increases had been confined to locations such as the Palm and Dubai Hills, locations with some of the most expensive homes in Dubai. It was felt by many that it would take much longer for the rent rise to filter through to the rest of the market. Clearly, that is not how this is going to be.
A two-bedroom apartment at Dubai Marina currently leases at an average Dh70,000 plus, though those at upscale towers now charge Dh90,000 and over. At the Downtown, a two-bedroom would be in the Dh100,000 plus range, with a Burj view requiring a higher rental premium.
Beating the Index
Landlords are testing how high they can ask given that the mood in the property market is changing. In the majority of cases, there is still a lot of negotiation happening and landlords willing to eventually settle for less.
However, there are more instances of “landlords increasing their rents in high demand areas and who gave a discount during the pandemic,” said Lynnette. “Some landlords are asking for rent increases above what is indicated in the RERA Rental Calculator as prices in some communities increased so quickly during the pandemic, especially for villas/townhouses.”
Not empty for long
A true gauge of current demand is how quickly a listed property finds a new tenant. At the top end of the market, and backed by a right sort of rental demand, a property is being picked up by a new tenant within a month. That would compare to an average of two to three months in 2019 and early 2020.
“In prime areas, these properties sometimes don't even make it onto a listing portal as they are being snapped up that quickly,” said Lynnette. “We have seen year-on-year double-digit increases for both sales and rental prices in villa and townhouse communities. In second-half last year, a handful of developers added more villa/townhouse phases into their existing projects and they sold out within hours.”
Still time for catch up
But more budget-conscious tenants in Dubai should not worry the same will happen to them overnight. Locations such as JVC, Discovery Gardens and areas outside of freehold clusters such as Al Nahda and Bur Dubai are seeing rents hold at current extremely low levels.
“Rental data is still showing a declining trend as it has over the past few years due to high supply,” she said. “During the pandemic, developers concentrated on completing existing projects which they had in their pipeline; therefore supply continues to enter into the market.
“If we look at project data, we show over 80,000 units scheduled to be completed by the end of 2022. The amount of upcoming supply will continue to affect rental prices across the board - and the apartment segment will be affected most.”