Dubai: The rental rate pick up in Dubai is filtering through to the city’s more affordable locations, and which will force tenants to make some heavy adjustments on their spending. In Deira, which through the last five years had seen some sharp declines, the average rental increase at the end of March was 11 per cent, with a two-bedroom ranging between Dh40,000-Dh80,000 a year.
In Jumeirah Village, even with new buildings being delivered regularly through these last 48 months, rents have shot up by 21 per cent in the year-to-March end. That means, on average, a two-bedroom unit would be between Dh47,500-Dh90,000, according to the latest UAE real estate update from the property services firm Asteco.
“The rent increase is good news for property investors who have just been handed over their units at JVC or Dubai Sports City – they can instantly demand higher rentals,” said an estate agent. “JVC is in heavy demand, from those wanting to relocate or those who are new to Dubai.
“For existing tenants, there aren’t that many choices – they have to negotiate hard on the rent hikes or seek new leases, where they get a two-year rent freeze.”
Taken by surprise
That some changes would happen to rents in Dubai was a given, given how locations such as the Palm and Dubai Hills had been faring for most of 2021. While the Dh100 million deals were what caught the attention, it was also becoming visible that rents at the Palm, DIFC and Downtown were also on the march for the first time since late 2015. (Dubai Hills and most of the MBR City stretches are relatively new to market.)
According to the Asteco report, there is not a single location – apart from Discovery Gardens and International City – in Dubai that have not seen double-digit rental gains in the 12 months to end March. Dubai Marina – 25 per cent year-on-year. Business Bay – 21 per cent. Dubai Sports City, where it seemed that new building completions will prevent any hike for some time, has had a 15 per cent gain during this period.
The average rental increase on villas in Dubai in the 12 months to end March '22
Less incentives too
With the market in such firm territory, landlords are holding back on incentives. There are still a few who will offer multiple cheques and discounts on full upfront payments – but the market is not seeing much of one- or two-month rent-free leases in the mid- to high-end. It is only in the super-luxury space that still sees landlords offering that.
“Overnight, Dubai has turned into a landlords’ market – these days it’s becoming quite noticeable in locations such as Dubai Marina and Downtown,” said an estate agent.
Can rent gains be maintained?
In the first three months, average apartment and villa rentals had increases of 4 per cent and 5 per cent, respectively, Asteco report states. “Villas continued to be the predominant focus of demand and the limited number of new handovers translated into higher rental and occupancy rates,” the report adds. “Rental rates across all major asset classes are expected to increase further for good quality properties, albeit at a slower rate.”
Now, many in the business agree with the first part of that statement – about more increases. As for the second-half of the statement - about a slow down in rent gains - many are not so sure.
“Going purely by what you see on the roads or the Metro, the impression is that more people are landing in the UAE to make it their home,” said a developer. “This is what’s driving rents, pure and simple.”