Dubai: The number of new residential listings in Dubai for one-year rental contracts is dropping, which should put further pressure on rates when it comes to new leases. Sustained demand from new residents to the city and the fact more landlords have been placing their properties in the short-term letting market are what’s causing this drop.
This is at a time when annual rentals have already increased by 15-25 per cent in nearly all of the popular residential areas in Dubai over the last 12 months. It sets up the possibility of more sharp rent demands from landlords in the coming weeks, whether that’s for new leases or renewals. It could be another four- to six months before new residential buildings in Dubai are completed and, hopefully, ease the upward pressure on rents.
“Even areas such as Downtown and Business Bay are noticing turnkey apartments are less available than they once were,” said Liam Dawett, Business Branch Leasing Manager at Betterhomes. “Prices are still going higher due to the lack of supply in vacant properties.” (Turnkey properties are those that investors can buy immediately and lease out.)
“We are seeing availability reduce until first- or second quarter of 2023. (Right now), fewer listings are coming to the market for rent.
"Due to the lack of turnkey apartments, owners with vacant properties are increasing their prices as the RERA Rental Index doesn't completely restrict them. Tenants who need the space or see value in paying the prices for these areas are doing so. They don't have much of an option within the market."
It's a landlords' market
This does leave the tenants in a bit of dilemma, especially those who have leases due for renewal in the next few weeks. Chances of them finding new homes that are in sync with what they are ready to pay as rents are getting tighter by the day. Even on lease renewals, landlords are asking for far more than what the Rental Index suggests.
“These landlords would prefer if their current tenants move out – that way they can get market rates on their new contracts,” said an estate agent. “The Dubai property market is truly feeling the pinch from limited availability.”
Newly completed residential buildings from the likes of wasl Properties and private developers are being leased out in days, say market sources. And some of the buildings due for completion in the first quarter are already pre-booked.
None of this should surprise anyone – even Dh1 million plus rental properties on the Palm or Dubai Hills have ready tenants. While most of the attention had been on sales demand for Dubai homes, rentals are doing quite well for themselves.
Short-term rental options have been popular with landlords in Dubai – and increasingly so in Abu Dhabi and Sharjah – since late 2021. Now, with the Doha World Cup on and the rush of visitors expected in Dubai for the closing days of 2022, landlords are doubling down on what they can get out of short lets.
Some landlords have confirmed bookings running all the way to late January, and at lease rates around 20-40 per cent higher than what they were same time last year. “Some owners are seeing higher returns in short-term rentals and more inclined to go for this option,” said Dawett. “They will reassess (their positions) only in the new year.”