Dubai: Thinking of shifting to another rented property in Dubai? The chances are you will find an apartment that’s still well within your budget because, right now, apartment rentals are yet to see any sort of sustained increases.
That’s the case with most of the popular residential locations in the city, according to new research by the consultancy Core, with the Palm being the sole exception. What this means is that the current pick up in property activity in Dubai is mostly happening on the sales side, and that rents could yet take some time to stage a recovery.
At the very least, someone looking to shift to a new apartment will not have to worry about a sharp rise. “City-wide apartment rents are still 5 per cent lower than in Q3-2020,” says the Core report. (But at the Palm, apartment rents have gained 12 per cent during the period, a lot of which has been driven by new residents to Dubai, according to market feedback.)
The two other locations that could soon see rents starting to make broad gains are Dubai Marina and the Downtown. The Jumeirah Village Circle cluster too is recording consistent demand from those wanting to move into a more centralised location – but so far, there is enough new supply happening there to prevent a rental increase.
It is at the more affordable communities that the rents have dropped the most – and take even longer to recover. Dubai Sports City rents are down 12 per cent from a year ago, while Dubailand is down 10 per cent on average. Discovery Gardens’ average is lower by 20 per cent from a year ago.
and absorption challenges. But the rate of rental declines is starting to decelerate.
Surge in supply
Keeping the pressure on these rents is the presence of an estimated 37,000 new homes being completed before December 31 – and making it the highest completion in 10 years. Already, around 25,000 units hit the completion line in the first nine months – quite a few of these will be pushed into the rental market and that’s why overall citywide rents are unlikely to see sudden rises.
Keep watch on new jobs
For higher absorption rates, new jobs will need to be created. In the last three months, various reports talk about higher intake of new staff by businesses, but these are still gradual. Real estate sources say it could be around March next that the full impact of job additions filter fully down into the local rental market.
Villa rents sizzle
Anyone who decided to make a move to a new villa in the second-half of last year have every right to be mighty pleased. They would have been able to negotiate a deal where the rents were at their lowest in five years.
That’s not the case now – someone leasing out a brand new villa will have to pay anywhere between 5-25 per cent over the prevailing rates. “Most rental rises are in the new-let villas as landlords have been able to list and rent at 5-25 per cent per cent higher rents,” the report notes. “However, we haven’t witnessed similar levels of escalations in lease renewals, potentially due to RERA rental regulations.”
"While these rental and sale price increases are significant, they are compared to the lowest point in the market cycle over Q3-2020," said Prathyusha Gurrapu, Head of Research & Advisory at Core. "All villa markets are still significantly lower than their 2014 peak values and are gradually moving towards them."
Apart from the Palm, other prominent villa communities such as The Springs and The Meadows too recorded increases, by 16 per cent on average in the last 12 months, while The Lakes cluster recorded a 15 per cent gain. Across the city, villa rents are 14 per cent higher.
"The sharp rises in capital values and rentals, particularly in the established villa and prime apartment districts have considerably outperformed most market forecasts," said Gurrapu.
As new homes in Dubai inch closer to completion, potential buyers are flooded with offers. There are more direct from developer offers, where the buyer can pay off the apartment value over 10 years. And here’s the plus – they can get their property within the next five- to 11 months.
At a time when more residents are willing to entertain thoughts of owning a property in Dubai, these promotions could score heavily.