Dubai skyline
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With plenty of supply in the market, tenants continue to enjoy good deals across different locations. Property rents in Dubai have remained highly competitive as a result of many factors, but property experts all agree that the influx of supply is the main challenge. According to Naval Vohra, CEO of Appello Real Estate, rents last year went as far as 21 per cent lower than they were two years ago.

“The downward trend is also observed in rents for Dubai villas and town houses,” says Vohra. “Hence, this is a great time for renters as they have so much choice on offer and bargains abound.”

The average annual rents in Dubai dropped by 9.2 per cent in the first three quarters last year, according to ValuStrat, compared to 8.4 per cent in 2018 and 9.1 per cent in 2017.

Rents reaching 2013 mark

“One can now rent a studio apartment from Dh28,000 onwards in areas such as Jumeirah Village Circle [JVC], Jumeirah Village Triangle [JVT] or Discovery Gardens,” says Vohra. “When you add a few thousand dirhams, you can move into Dubai Marina, renting a studio for Dh37,000 or in Downtown Dubai for Dh53,000 upwards.”

Comparing actual rental contracts with the Rera index, Firas Al Msaddi, CEO of fäm Properties, says actual rents have dipped overall. “For example, the average rent of a studio in Business Bay is Dh50,000, whereas in the Rera index the minimum rental of the studio in Business Bay is Dh50,000,” says Al Msaddi. “We rented a furnished studio in Bay’s Edge in 2017 for Dh70,000; in 2018 the rent was Dh62,000 and in 2019 the rent dropped to Dh50,000.”

Al Msaddi says the Rera index was “closer to reality in 2013 and 2014 where Dh35,000 to Dh60,000 was the rental range of a studio in Business Bay as per the 2013 index. In Q4 2019, a studio was for Dh35,000 in Business Bay. The rents are pushed down because of massive property supply, and some towers have lost their premium views, and towers adjacent to construction sites are less appealing.”

As a result, agents are forced to negotiate prices with owners. “Even if there is only one property in a tower at a low price, agents use that to reduce the prices of other units in the tower,” says Al Msaddi. “Also, new communities have been already established, and some are coming soon. Many prefer to live in Business Bay to be next to Downtown, but for a lower amount soon Meydan will take some demand from Business Bay and Downtown.”

Market concerns

Al Msaddi says a rental dip makes property investment less attractive, mainly because the service charges are high in some projects. As such, he says it is important to reduce the service charges.

“The service charges in some towers in Business Bay are around Dh26 (per square foot) plus Dh1,800 per parking slot. The service charges for 2019 have not been published for the majority of the towers in Downtown, Business Bay and for Arabian Ranches 1 and 2,” says Al Msaddi. “However, the current service charges in some towers or properties might reach 40 per cent of income. This makes property investment less appealing.”

The current trend

Offering a snapshot of the tenant market, Vohra says, “Our company has seen a 16 per cent increase in the registration of new tenants compared to 2018. Thirty-four per cent of clients were upgrading to a bigger property, paying the same rent and getting more value for money in terms of the number of bedrooms. Also, 37 per cent of our clients have shifted into newer constructions and new communities. Ten per cent shifted into similar properties in the same communities with cheaper rents. Five per cent downgraded into smaller properties. The remaining 14 per cent were new to Dubai and were securing a new rental home for themselves.”

Vohra expects Dubai residents to continue to enjoy lower rents this year, even with the anticipated economic upsurge brought about by Expo 2020. “More units will become available, thus upping competition in the market,” says Vohra. “Some consider the Expo will make rents soar; I do not see that to be the case. Residents will be paying less rent due to a supply-and-demand correction, subdued population growth, bearish market sentiment and some global uncertainties. The dip in rental prices is one of the natural flux of a vibrant property market that will correct itself.

“Dubai’s residential market has seen a significant shift in development and transactions from luxury to affordable units over the past few years. Market dynamics are changing, and Dubai will adjust.”

Supply and demand have been critical factors for rental correction. However, Vohra notes that with the correction in the sales prices of the properties, 10-15 per cent of rental clients have now become end users. These tenants have either purchased a property of their choice or are actively looking to buy one, hence removing a significant portion of rental clients.

Al Msaddi also does not foresee a rise in rental prices. “The Expo visitors will be mainly renting in Dubai South area,” he says. “It is hard to imagine any rental increase in these areas. This is because of the number of upcoming units: in Business Bay it is 16,917, in Meydan it’s 13,135, Downtown Dubai 9,774, JVC 9,054 and Dubai Hills Estates 8,008 units. So, it depends on new property supply, and more precisely on the delivery rate to anticipate any rent rise. The overall delivery rate in Dubai in 2019 has been 44 per cent.”

Advice for tenants

When negotiating on the rents, compare your apartment or villa to other similar properties, says Swapnil Pillai, associate, research Middle East at Savills. This will indicate if you are overpaying. “Check how much they are being rented for and then chat with your landlord to see if you can come to a better price,” says Pillai. “Also, depending on the location, the renter can negotiate for an all-inclusive rent, which may include chiller and other charges. Landlords are now flexible with the lease terms and can offer multiple payment options.”

Vohra’s advice to tenants looking to renew their home is to be clear about their plans. “Are you planning to stay in the UAE long term? Has anything changed hinting that you may not need a whole new tenure of the lease? Maybe your job isn’t looking so stable. It’s worth considering all this when your tenancy contract renewal is due so you can avoid complications later.”

Another important point is checking for any changes to your lease terms. “These could be anything from parking fees to changes in building rules like pets suddenly not being allowed in the building. Ask your landlord directly as your three-months-to-renewal date approaches.”