Dubai rent hikes: More tenants face second year of double-digit increases
Landlords rush to push their rents to that area's market average under Rental Index
Dubai: Rents easing in Dubai? Not for a significant number of residents, who now have to decide whether to renew leases after their landlords decided to raise rents in double-digit ranges.
And here’s the painful part for these tenants – this year’s hike comes after they had already seen a double-digit increase at last year’s renewal.
The trend shows that a sizable number of landlords in Dubai are rushing to ‘level up’ their rents after the introduction of the real-time Rental Index by the Dubai Land Department in January. “There is no rental correction going on in Dubai right now,” said a leasing agent. “Landlords who are allowed to hike rents as per the data from the Rental Index are doing just that.
“There is no reason why they should hold back from doing so. It’s up to the tenants to decide whether they should stay on or quit.”
This does leave affected tenants with quick decisions to be made. Stay on and they have to comply with the second (or third) successive rate increase. Decide to vacate and search elsewhere opens up the possibility they might still have to pay the elevated rents that are prevailing across Dubai.
At the same time, there have been indications of some ‘softening’ happening at some residential properties, which are essentially older buildings and whose landlords cannot raise rents under the star rating system of the updated Rental Index.
It’s likely that now each opportunity a landlord gets to increase the rent, they are able to do so. Because the rental market has gone up a lot more over the last year.
Rupert Simmonds is the Director of Leasing at Betterhomes, and he reckons that there is a backdrop to tenants facing successive rent increases.
“It’s likely that this is for tenants who have been in the same property, say, for the last 3-4 years,” said Simmonds. “They would have been paying ongoing Covid-time rents – and because of the (previous) Rental Index, they probably were protected from today’s rents.
“It’s likely that now each opportunity a landlord gets to increase the rent, they are able to do so. Because the rental market has gone up a lot more over the last year.”
That’s just it. Landlords don’t want to be caught out when Dubai rents actually start to stabilize at some point. Then, that rents’ stabilizing will not be confined to a few areas or buildings, but will take place over a wider spread.
But that’s not the case now. Even with more residential buildings completed and ready for residents to move in. Whether they are the homeowners or tenants.
“About 40% of the units at out first freehold project in Liwan are expected to be placed in the rental market,” said Murtaza Moiz, Vice-Chairman of Symbolic Developments and Speedex Group, which recently handed over a Dh150 million building in the area.
“The other 60% were acquired by end-users, and for us that means a balanced profile for the project and the Liwan area.
“Rental rates in Liwan range from Dh65,000-Dh70,000 for a one-bedroom and Dh100,000-Dh120,000 3-bedroom units. These figures represent strong rental yields, with Liwan poised for further growth supported by ongoing infrastructure enhancements.’
About 40% of the units at out first freehold project in Liwan are expected to be placed in the rental market, the other 60% were acquired by end-users...
Developers with projects completed or nearing completion in other happening areas of Dubai have the same message – sure, they have their end-user buyers, but a sizable portion of the units will still be rented out.
Forecasts vary on the number of project handovers that will take place this year, with optimum estimates suggesting around another 70,000-100,000 units.
Now, if a sizable part of whatever is being delivered this year end up in the rental market, that's possibly when 'real change' can happen in Dubai home rents. Areas such as Liwan, Arjan, Sports City and Dubai South have new project deliveries happening.
By year-end, tenants and landlords should have a better reading of where rents are headed.
"If rents stabilize at those levels, that's ideal for landlords," said a real estate industry source. "If there is a 5%-10% downward change, then good for tenants and shows that more supply is tilting rental demands.
"Any rent drop of 15%-20% is a major correction - and a downturn for the overall property market..."
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