Dubai: Occupancy levels in Dubai’s rented homes are now at a 5-year high, further adding to the double-digit rental increases the property market has been seeing this year. Increases in the city’s resident base is fuelling this spike, and the only solution would be to have more new-built homes entering the rental market.
Check out this data: Three of the most prominent locations in Dubai with new and existing residents – Dubai Marina, Business Bay, Downtown Dubai and JLT – have apartment rentals up 18, 11, 19 and 14 per cent at the end of September compared with a year ago, according to the latest market update from Betterhomes. Head to Dubai Hills, and the average increases in rental rates has crossed 30 per cent during the 12 months to September.
Other more budget-friendly locations in the city too are going through the same sort of rental gains.
While I expect demand to continue to outstrip supply over the next period, we did see some improvements in the rental supply during September...
“The recent large migration of expats and their families to the UAE continues to impact average rental prices,” said the Betterhomes report. “GEMS Education announced in September that intake in their schools was up 7 per cent year-on-year, which is a great indication of the number of new families now calling Dubai home.
“The average leasing price of townhouses rose by 35 per cent, and apartments also saw a surge in average rental of 36 per cent year-on-year.”
Will it be more rent increases?
Looks like that, as the number of new property listings are nowhere near where demand levels currently are at. “Handover of new inventory has struggled to keep up, and the supply of rental property in older residential communities has been further constrained by end-user purchasers and a higher rate of tenancy renewals,” said Richard Waind, Group Managing Director at Betterhomes. “While I expect demand to continue to outstrip supply over the next period, we did see some improvements in the rental supply during September, with new villa rental listings up 21 per cent and apartments up 32 per cent from this year's monthly averages.”
But market sources say that new listings are taking less time to get a tenant, such is the way demand has been progressing.
Renew the lease
What Waind said about higher tenancy renewals is indicative of how tenants are trying to beat the rental increases. Or at least sign up for something that's less expensive.
More tenants are realising that their best chance to pay a lower rental is agree to the demand of their current landlord rather than try their luck with a new one. “Chances are that a newer property could come with a rental demand higher by 10-15 per cent than the renewal rate,” said an estate agent. “That window of opportunity when a relocation to a new home meant a lower rate has long been shut.”
Even locations such as Dubai Creek Harbour and the fast emerging Emaar Beachfront have rents at a premium. In Emaar Beachfront, indicative rentals are between Dh185,000-Dh350,000, according to Waind, while Creek Harbour is listing at Dh85,000-Dh182,000. As has been said before, Dubai South remains the more affordable choices, with apartments averaging around Dh36,000 (against Dh31,000 a year ago), while a villa there would be Dh138,400 (against Dh106,917).
More tenants, seeing the way rents are gaining, could be inclined to consider rent-to-own schemes. Some developers/sellers have been quick to spot this chance and offering such options to their tenants. The offer does come with a premium attached, but many potential buyers see merit in signing up rather than waiting for market dynamics to change and rents to stabilise.