Much of the sharp gains in Dubai rentals in these 3 years have been at upper-mid to top end of the market. Now, it's filtering through to the mid-tier areas. Image Credit: Shutterstock

Dubai: Tenants in Dubai who have been getting lease renewal requests are seeing some sharp increases on rentals as landlords try to bring rates to ‘market averages’. To this end, they are starting to hike rents by the maximum 20 per cent where possible.

This is being particularly felt in the mid- to upper-mid market residential communities – JVC, Furjan, etc. – rather than in the premium end of the rental market. Even locations such as Sports City, the areas around DIP and elsewhere are facing these higher demands. The new leases feature hikes of 10-20 per cent, more or less.

Get exclusive content with Gulf News WhatsApp channel

This comes after property market observers say the RERA Rental Index has seen its average rental values for popular residential locations in Dubai being revised.

“The updates bring the average closer to what the actual market averages are in Dubai currently,” said a property leasing agent. "These revisions will feed into asking rental prices in the coming weeks and months - this will be of particular importance for mid-market areas and their tenants."

RERA rent index

Until quite recently, most of the rental averages in the RERA rent index had been skewing towards 2020 averages or thereabouts. Now, market sources say, there has been a comprehensive revision to bring index closer to the Dubai rental market dynamics.

Even earlier, the demand pressure for rental options from a fast expanding resident base had landlords going in for sizable hikes. It was easy if it was a brand new building and thus getting first-time residents. In older buildings, landlords were forcing up rates on renewals, and when they were not getting it, forcing evictions.

Industry observers say that the RERA index update thus represents 'more of a catching up' with actual market rates. "This implies that going forward the number of eviction notices can go down and the pace of rental increases will also slow as the Dubai rental market levels up," said an estate agent.

Multiple market observers are now talking about rental growth rates slowing down. But that mostly applies to the top-of-the-range residential neighbourhoods, after seeing anywhere over 30-40 per cent rent gains since 2021. And even in 2023, the cooling off was yet to be seen.

Under RERA rules, this is the extent of hikes that landlords can apply: 

  1. 11%-20% below market value: 5% maximum rental increase.
  2. 21%-30% below market value: 10% maximum rental increase
  3. 31%-40% below market value: 15% maximum rental increase.
  4. 40% or more below market value: 20% maximum rental increase.

Snapshots of Dubai rental market

According to the property portal Dubizzle, the average yearly rent for studio, 1- and 2-bed apartments in Dubai Marina increased by 18.33, 17.39 and 17.99 per cent, respectively, last year. "During 2023, the annual average rent for studio apartments in Dubai Marina was recorded at Dh71,000," a report by Dubizzle notes. "Whereas tenants, on average, paid Dh108,000 and Dh164,000 for 1- and 2-bed apartments."

Now, market sources say, it's unlikely that prime areas in the city will keep recording that kind of growth. But not so in the mid-market residential districts.

"More mid-market tenants are confronted with Dh4,000-Dh5,000 hikes on lease renewals," said an agent. "That going by current trends constitutes the average, and most tenants are willing to accept these terms. It's when the demand gets to be Dh8,000-Dh12,000 higher on renewals, that they face problems.

"Even then, the chances are they will still renew, because whatever options there are out there will quite likely be higher. Even when shifting from a mid-market area to another such in the city."

Mid-market options - and rents they come at

For what mid-market residents have to factor in, a look at the JVC dynamics can provide an insight. While Jumeirah Village Circle has its share of upper-mid options too, it’s a prized location for more affordable homes to rent.

Here, the average yearly apartment rent has increased by 32 per cent – and making it the ‘biggest rise in the affordable rental apartment category’, according to the Dubizzle report. “The average annual rent for flats in JVC has jumped from Dh50,000 in 2022 to Dh66,000 in 2023.”

And this in a location favoured by families and 'one of the top areas for students in Dubai'.

The same trends on rent increases keep repeating in other such locations. Market sources say next up could be Sports City as the location likely to feel the rental pressure.

The full force of any change to the RERA rent index will take time to play out. But mid-market rents are where this will likely be felt the most. For tenants, there are some adjustments that they need to make.