Drop in rents give Dubai residents more choice
The decline in rental price has given residents more control and say in the market.
Dubai: The affordability of rental properties in Dubai due to falling rents is giving residents more options and more time.
The drop in prices have given Dubai residents a choice of properties with more bedrooms, better locations and improved facilities, which are now within their budget. The decline in rental price has also given residents more control and stability in the city. It is encouraging to see so many people starting families and really settling into life in Dubai.
Renting a residential apartment in Dubai has become even cheaper now as the market has recorded a further 3 per cent dip in the rents in the third quarter of this year.
There has been a total of 12 per cent decrease in rents of residential unit in a year since the third quarter of 2018 and an overall of 35 per cent dip since the peak year in 2014, according to Asteco, a property management company in the UAE.
More options to move house
According to Allsopp & Allsopp, a British owned estate agent in Dubai, the Emirate has seen a 14 per cent rise in tenant registrations from the period August 2018 to August 2019 mainly because tenants are opting to move to houses with lower rents.
The decline in property prices across Dubai has been heavily documented this year, mainly showing the negative impact on the real estate market but it has given more stability and affordability .
“51% of our tenants have decided to upgrade and move to a home which was previously out of their reach,” according to report by Allsopp&Allsopp.
Affordable luxury homes
Of the 51 per cent of tenants upgrading, 15 per cent of those have had the luxury of moving from an apartment to a villa where they can have more space for family time with a garden for barbeques, play sets and even a pool, which inevitably will improve their quality of life.
Many tenants have been looking into their options in the market after brokers have been showing them what is available across the whole of Dubai within their budget.
Tenants know which areas they can afford to rent in – areas, which were previously out of budget.
“30 per cent of our tenants moved from one community to another this summer, some of which were upgrades, for the simple reason that they had more choice within their budget,” the report revealed.
When doing research into areas within their price bracket they found that they had much more choice when looking for their home. In some cases, tenants had moved to the same type of property in the same area for a lower price.
For example, a 2-bedroom apartment in Marina promenade in June, 2018 was rented for Dh160,000 whereas a 2-bedroom apartment in Marina Promenade in June, 2019 was rented for Dh130,000.
Similar price decreases were seen in a 2-bedroom townhouse in Palmera in the Arabian Ranches from Dh130,000 in June, 2018 to Dh115,000 in June, 2019.
The affordability of rental properties in Dubai is giving residents more choice and more time.
Saving money with attractive options
On the other hand, some tenants have decided to take advantage of the price drop and downgrade to a cheaper property giving them the opportunity to save extra money to put towards a deposit on their first home in Dubai.
First-time buyers in the city should expect to pay roughly 33% of the property value upfront. This is proving difficult for many first-time buyers in the city and the drop in rental prices can be beneficial for those looking to get onto the property ladder whilst prices are attractive and within reach.
Some 29 per cent of tenants who rented through Allsopp & Allsopp this summer were new to Dubai.
According to Dubai Statistics Center, the population of the city has grown by 37,102 people from June,1 2019 to August 25, 2019. Residents, who are new to Dubai have moved for the vast job opportunities and the chance to live and work in a vibrant, fast paced city.
A few of these tenants are moving over to work on Expo 2020 which will commence on October 20, 2020.
Rent cap is not relevant anymore
Due to falling rental prices of the residential units, residents are no more bothered about the ‘rent cap law’ which was introduced a few years ago to control the rent increase. In Dubai, rent increase is calculated based on the RERA Rent Index while in Abu Dhabi maximum of five per cent annual rent increase is allowed. In Sharjah, the first rent increase is allowed after three year of the new contract and then every two years but there is no limit.
However, these rent capping laws have now become irrelevant at least for the time being because the rents are instead decreasing.
Here is the rent increase calculator based on RERA Rent Index.
No increase in the rental price of the property, if its rental price is less than 10% of the average market rental rate.
Five per cent increase if the earlier rental price is 11 to 20% lower than the average rental price for a similar property;
10% increase if the rental price is 21 to 30% lower than the current rental price for a similar property
15% if the rental price is as low as 31 to 40% than comparable ones; and
20% if a property’s rental price is more than 40% less than the average
If the landlord plans on increasing the annual rent, he must do so according to the RERA Rent Index and give the tenant a 90-day notice period before renewing the contract.