Renting in Dubai: what you need to know

From prices, to insurance, to knowing your rights – here's your essential guide to finding your new home in Dubai this year

The cost of renting in Dubai is always a hot topic on every resident’s mind, especially if their lease is coming up for renewal. It’s been 12 months since we last explored the subject and September is always a good time to open the proverbial Pandora’s Box, since it’s when we tend to see a lot of movement in the market following the return of residents after the summer hiatus.

Dubai’s rental market is a hive of activity currently. As well as new supply being added to the market, there’s also plenty of movement in terms of residents shifting around town and taking up new tenancy contracts. In fact, Devin Hipkin, managing director of real estate firm HMS Homes (www.hmshomes.com) says that the rental market has been “very active due to the growth of residents in Dubai and a larger supply of new developments being handed over”. He says that his firm has noticed an increase in rental activity this year, over previous years.

Paul Kelly, operations director at estate agency Allsopp & Allsopp Real Estate, notes the same. He says that his firm has seen “record months this year for the number of leases agreed”, and that there are “as many, if not more, people moving”.

But despite this influx of people and record movement in the market, it’s no secret that rents have been steadily in decline for some time. Matthew Green, head of research and consultancy at CBRE Middle East (www.cbre.ae) observes that rents over the past year have seen a three percent drop for apartments and a two percent drop for villas.

Compared to other agencies, this observation could be seen as conservative. Zubin Firozi, director of operations at Better Homes (www.bhomes.com), paints a starker picture. “Over the past year, we have seen an average decline in rental prices of approximately seven percent for apartments and 7.5 percent for villas across freehold communities,” he says.

According to figures from online portal Propertyfinder (www.propertyfinder.ae), average rents per square foot have fallen across virtually all communities in Dubai. In the 12 months from July 2016, Downtown Dubai saw a decrease of 7.8 percent, with rents recorded at Dhs118 per sq ft, down from Dhs128.

The biggest declines were seen in Jumeirah Village Circle, where Propertyfinder data records that average rents have fallen by 11.3 percent in the 12 months from July 2016, making them Dhs71 per sq ft this year, down from Dhs80 per sq ft.

The most interesting dips have been on the Palm Jumeirah, where rents have decreased by 9.8 percent year on year. Rents on the man-made island now stand at Dhs92 per sq ft on average, down from Dhs102 per sq ft, putting them on a par with rents in JLT (Dhs93 per sq ft), JBR (Dhs92 per sq ft) and Business Bay (Dhs91 per sq ft).

According to data from Property Monitor by Cavendish Maxwell, in the first half of this year, average rents for a one-bedroom apartment in Downtown Dubai reduced from Dhs117,296 to Dhs112,401. In Jumeirah Village Circle, meanwhile, they’re down to Dhs65,575 from Dhs70,000.

Meanwhile, the average for a one-bedroom in JLT is Dhs80,343, down from Dhs86,113, JBR Dhs117,958, down from Dhs124,700 at the start of the year, while rents in Business Bay stand at Dhs81,740, down from Dhs91,750 at the start of the year. Conversely, Palm Jumeirah appears to be bucking the trend, with prices (according to the same Property Monitor data) now at Dhs141,758 for a one-bedroom, up from Dhs128,694 at the beginning of the year.

There are a number of reasons why the market has seen a lot of movement at the same time as a general decline in rental values, but it primarily comes back to that age-old conundrum of supply and demand. While there is still demand, the amount of supply currently coming onto the market far outweighs it, which has caused rents to dip, as potential renters now have more choice.

“Dubai’s rental market has continued to soften over the past 12 months, driven by rising new supply levels,” says Green. “This is helping to form a tenant-driven market, whereby occupiers are able to negotiate more attractive terms with landlords, particularly for new leases, with lower rental rates and a higher number of cheques negotiable across many locations,” he says.

However, he adds that tenants on existing leases are generally not finding the same level of flexibility from their landlords, which could also be the cause of those record numbers of people deciding to move. “But rental increases on lease renewals are becoming less prevalent,” Green notes.

Nevertheless, it’s a tenant’s market at the moment. “Landlords are now accepting an increased number of cheques,” Kelly concurs. “And in some communities, incentives are being put out there for prospective tenants, such as 13 months’ rent for the price of 12, and white goods being added to the property if it doesn’t already have them, so there is less of a cost to the tenant.”

Firozi agrees. “Over the past year tenants have gained an upper hand while negotiating contracts, getting more favourable terms,” he says. “In some cases, we’ve seen landlords offering rent-free periods and the payment of agency fees in order to entice tenants.”

Lukman Hajje, group CCO of Propertyfinder, also points out rent-free periods being passed on to tenants, and Green highlights this as a trend. “The main trends at the moment relate to the evolution of a tenant’s market, with negotiable rents, a higher number of cheques and even rent-free in some cases. There’s also a continued shift towards affordability, with tenants typically becoming more cautious with their housing requirements and/or looking for value in secondary locations, such as Jumeirah Village Circle or Reem.”

Another notable trend is among property owners with mortgages, who Firozi says are now responding differently. “They are more likely to reduce the rents on their properties to tempt tenants, rather than enduring a prolonged period without any rental income,” he says.

So the past 12 months have been tricky to say the least. There have been some vast changes and landlords have had to adapt, as painful as that might be. “We have to remember that as good as cheap rents are, a lot of landlords aren’t big companies or multiple investors, so there is pain in the market currently,” says Kelly.

Hipkin feels that if landlords take a strategic approach, some of this pain can still be alleviated. “Landlords are more aware that if they decline a fair offer from a potential tenant they could lose that to a neighbouring [landlord] who is willing to accept that same offer,” he says. “So landlords stand a better chance of negotiating if their property is listed exclusively with one agent, they have a unique or rare property, it’s immaculate and well-maintained and is upgraded to a high standard.”

However, regardless of this, some agents feel there is still more pain to be felt, as the market could have further to fall. Green says that he expects to see “further widespread deflation of rental rates in H2 2017 and into 2018, as new supply is delivered, and as available options for tenants increase.”

Hajje agrees. “There is room for rents to come down further, with figures beginning to bottom out in 2018 or early 2019, and demand expected to increase in the lead up to 2020.

Others are more cautiously optimistic, feeling that the decline in rents for many freehold communities has already started to slow down and/or bottom out. “We expect rents to be stable over the next quarter,” Firozi says.

So what shape will the market be in come 2018? Hipkin says the future looks bright. “Dubai is arguably the fastest-growing city in the world and it seems to be staying that way for the foreseeable,” he says. “I can’t see much change in rental rates over the next 12 months, as although Dubai is a fast-growing city, there are a host of new properties being handed over to the market, which should even out supply and demand.”

This is a sentiment echoed by Kelly. “I don’t think we will see the same kind of drop in the market again,” he says. “There will be more handovers coming up, but as we get into 2018, we’ll also see things start to ramp up for Expo 2020, which will create a lot more jobs and bring a lot of people to Dubai. I would expect small drops and then a stabilisation of the rates.”

Some agents are even quite bullish. “We expect rents to stop declining in some communities over the next 12 months and may even begin to see increases in some communities such as Dubai Marina and JLT,” Firozi says. And with Expo 2020 on the horizon, he believes that more new jobs will be created, thereby increasing demand. However, he adds a caveat. “Around 27,000 new apartments are expected to be added in 2018, which could put some pressure on rental prices,” he says.

But there is good news. While rents for studios and one-bedrooms have been in decline, rents for larger properties – two-bedrooms in Dubai Marina, Business Bay and Downtown Dubai, and two- and three-bedroom apartments in JBR – have actually increased over the first six months of the year, according to figures from Property Monitor by Cavendish Maxwell (see table on page 23). Perhaps tenants are taking the opportunity to move from smaller, individual properties and opting to share in larger, more desirable spaces, driving demand for such properties up, and supply of smaller properties down.

Dubai Marina has weathered the storm relatively well, seeing only a 4.7 percent decrease in rental values in the 12 months from July last year, according to Propertyfinder data. JLT also saw the lowest decrease in rents, with just a 3.1 percent dip over the same period, while a CBRE report put Business Bay in the same league.

“Dubai Marina still holds the title as the most sought-after residential area in the city,” says Firozi, who adds that 36 percent of all Better Homes’ rental contracts in Dubai fall under apartments in the Marina, followed
by JLT and JBR.

“We still have the main players in terms of the most popular areas,” says Kelly. “The Marina still comfortably holds onto top spot and is a top choice for the sheer amount of things to do right on your doorstep. Downtown, Business Bay, Sports City, Motor City and the Palm are also communities that maintain a position among the most popular.”

So, the past 12 months have been tough, but there is a glimmer of hope in the market’s eyes. Rents are starting to bottom out and the looming shadow of Expo 2020 looks set to bring very good things for the emirate. In the meantime, there are plenty of deals for tenants to take advantage of, and landlords must hold their reserve. The present may look a little gloomy for property owners, but the future, at least, looks bright.

Read more:

Read our cost comparison articles to understand how the rental market has changed in as many as eight Dubai districts over the past year:


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