Dubai: Rental increases in Dubai’s residential property market is picking up some serious speed, with more landlords starting to demand well above the official rental index from their existing tenants in high-demand locations.
Rents are higher by around 10 per cent across Dubai over the 12 months to end March – but in locations such as the Palm (up 36 per cent), Jumeirah Park (a 25 per cent year-on-year increase) and the Lakes (21 per cent), the annual increases for tenants have been nothing short of drastic. After five years of a soft rental market, Dubai has been seeing a major turnaround since the second-half of 2021.
When hit with out-of-turn rental hikes, tenants are resorting to the Rental Disputes Settlement Centre at Dubai Land Department as their last resort. And they want their landlords to stick by the range-bound rental increases set in the RERA rental index.
“We are seeing many tenants trying to find support from the rental index to avoid sharp rises landlords are asking for renewals,” said the latest update from the real estate consultancy Core. “New leases are driven by market conditions with many landlords, particularly of units in sought-after buildings and districts achieve their asking prices.”
Update to Rental Index?
The RERA rental index provides a broad range of prevailing rates in some of Dubai’s key residential areas. And there are clear percentage bands landlords must stick to if they plan to raise. According to market sources, current demand for leased homes is running way above the average over the last five years.
“This demand is not just from existing residents shifting to new homes, like what happened in last 2020 and early 2021,” said the head of brokerage services at a leading property firm. “This increase is fuelled in large part by newcomers who are taking up residency in the country. This will become more apparent in Dubai’s residential rental space like it did in the freehold sales.”
Which is why the rent index numbers could be in for a major updating soon.
These locations demand more
Outside of the villas on the Palm or Jumeirah Park, there are equally sharp rent increases at Dubai Marina (34 per cent), and at The Greens and The Views (both by 24 per cent). For tenants at the apartments on the Palm, the rental hikes they are being confronted with are quite steep – 34 per cent higher from what it was in March 2021.
“It will soon reach a point where it may be cheaper in the longer term to move into a new home rather than pay the higher rent on the current,” said a broker. “At least, moving to a new home ensures no rent increases for two years.”
Sales hit a purple patch
April provided another month of strong and sustained sales, both for ready homes and offplan units. Developers were expected to rush out with new offplan launches after Eid earlier this month, but that could now happen from June. Industry sources say that it is unlikely to be a slow summer by July and August – “European/CIS buyers are still going to be active, there’s nothing on the horizon that shows this demand will slow down soon,” said the broker.