Stock - JVC
Even budget-friendly JVC and JVT are turning out to be less so as Dubai residents chase rental options. Image Credit: Bloomberg

Dubai: Is your landlord demanding a rental hike? And quite a big increase at that?

Landlords in Dubai are doing so because occupancy levels at rented residential properties across the city has gone past even pre-pandemic levels, according to a new market update by Betterhomes. “Occupancy rates remained elevated in the first six months of the year,” the report notes. “Starting strong in the first quarter, they continued to improve in the second quarter with no signs of tapering off.” (Going by BH’s own portfolio, rented units in freehold areas were up 90 per cent and those in the non-freehold areas by 86 per cent.)

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Buyer demand increased by 23% in H1-2022, compared to H1 2021 and peaked in both April and May.

This would trouble tenants – because rents city-wide is up in double-digits as higher demand and low inventory push rental demands further. When it comes to villa rentals, year-on-year increases are in the 50 per cent range, according to market sources, while Better Homes notes its leased apartment rates gained 29 per cent and townhouses by 33 per cent.

This leaves more tenants opt for the relatively lower increased demanded by their current landlords. “Thwarted by higher prices and tight supply, more and more renters have chosen to stay put, negotiating and extending their current lease with their landlords, rather than entering the competitive leasing space. As a result, leasing transactions at Betterhomes declined by 25 per cent and inquiries dropped by 17 per cent.”

Affordable options?

The average rental rates in locations such as Jumeirah Village Circle and Jumeirah Village Triangle are around Dh50,352 and Dh52,719 annually. Head down to JLT, it becomes Dh82,804 a year and over at JBR, the asking average now tops at Dh112,800. Estate agents talk about heavy leasing activity featuring newcomers to Dubai, in the banking, tech and ecommerce sectors.

“There are two dynamics taking place – where possible existing residents are making do paying a little extra for renewals,” said an agent. “With new residents, they have no option but take up the best available options, and that typically means JBR, Business Bay and Dubai Marina.”

Who’s buying?

Indian buyers topped Betterhomes’ list by nationality, and the Top 5 were made up of those with UK, Italy, Russia and French passports. Buyers from the UK and France recorded double-digit gains for Betterhomes.

“The war in Ukraine, domestic tax concerns and an increasingly mobile workforce are some of the key reasons given for the increased migration of Europeans from their home countries,” the reported added. “For those already living abroad, we have also seen many global expats relocate to Dubai from the Asia-Pacific as a result of continuing Covid restrictions. Chinese buyers continued to drop in our rankings in the face of continued Covid lockdowns and now just made it into the Top 10.”

Aim for end-users, first-timers

The Dubai offplan launch space is coming off one of its strongest phases in recent years, with many developers adding to their inventory at upcoming locations such as MBR City, Dubai Hills and Dubai South.

More investments could flow into local real estate as other asset categories such as Bitcoin and cryptocurrencies fail to break off from the sustained decline in value.

“While the recent long term visa linked to a property purchase of Dh2 million has been universally well received, we would urge that more could be done to attract end users and in particular first-time buyers,” says the report. “End-users create stability and a maturity to the market which should be encouraged. In the face of rising interest rates and property prices, help in the form of Dubai Land Department fee reductions, and reduced loan-to-value requirements, for first-time buyers could be considered to bolster this segment of the market.”