Dubai: Tenants in Dubai hoping for an easing up in rental hikes might have to wait longer – new residents setting up homes continue to be the major factor behind demand continuing to move ahead of supply.
Then, there is also the demand created by tenants who are serving 12-month eviction notices trying to find a suitable abode on their budgets within the time left on their current leases. “Despite limited tenant movement, the conclusion of eviction notice periods implies a growing number of individuals will actively seek new leased units,” says a newly released report from the property services consultancy Asteco. “The (Dubai) rental landscape, characterised by its diversity, still holds growth potential for specific developments and areas.”
In 2024, Asteco estimates that 45,000 new homes will be completed and ready for occupancy. Even if a fair share of these units get end-users and a percentage set aside for short stay leases, it should still leave a significant number for the 1-year rental market. “Anticipating a rise in unit handovers in 2024, a moderation in rental rate growth is expected,” is how the Asteco report views the immediate future. (Even if only 30,000 new homes are delivered, that’s still a decent sized number to cast an impact on rental rates.)
Meanwhile, evictions continue, whereby property owners try to reclaim their rented units to try and get better returns from it. Current rules require that they should serve 12-month notice periods, under these circumstances:
- They themselves want to stay in the home at the end of the eviction period.
- They want to renovate or give a complete makeover.
- Or if they wanto sell the unit.
Landlords/property owners each have their motives for the evictions. According to market trends, even if they want to sell it, the chances of them getting a better asking price is higher if the property is vacant. The difference between a tenanted property and one without can be as high as 40-50 per cent.
Negotiate, find an in-between place
If landlords are using the RERA index, there are clear percentages beyond which they cannot demand more from an existing tenant. Here too eviction notices come in handy, but then the tenant and landlord come up with some formula on a new lease that’s agreeable to both parties.
Many are doing just that.
“We have had no choice but to sit down and negotiate with the landlord for a higher percentage rental increase as all other alternatives have been significantly higher,” said a tenant at an apartment in Jumeirah Village Circle.
This is the sentiment shared by many an existing tenant in the city. Entering re-negotiations with their landlord works out to lesser costs, after all.
Or should they just become an end-user?
There could be a substantial number of residents who will want to get to buying a home for their own use. If 2021-22 had seen many long-term residents do that, 2023 had budget-conscious deciding to sit it out until property values cool off. Or mortgage rates come off their current highs.
If this happens, this could be the trigger for the next end-user rush.
“The pace of rental rises have meant that we have moved towards purchasing a property,” said a tenant who is currently in a villa. “It allows us to build equity rather than just having to move around from one part of the city to another and have no asset to show for it.”
Some respite for Dubai residents
According to Asteco data, there were some locations in Dubai that did see residential rental gains soften up a bit.
“There are indications that they might be approaching a point of equilibrium,” the real estate firm adds. “A notable metric reinforcing this observation is the growing variance between listings and contracted rates, as documented by the Dubai Land Department.
“There has been a rise in rental increases exceeding RERA stipulations (for existing tenants) and consequently a surge in eviction notices as tenants challenged landlords.”
Where possible, that also meant tenants were also able to renegotiate terms with their current landlords.
Even with all this, “There are still quite a few deals in the rental market and we managed to keep our rental expense the same despite having to move out of the place we're living in," said a tenant who has just moved out of JVC and to Dubai South.
By the mid-year mark, landlords and tenants in the Dubai property market should be better placed to see if the new homes being delivered have slowed down rent increases. Those in mid-market residential rental space will obviously be the ones most keen to see that happen...