Dubai South and Dubailand will remain the most budget-friendly rental locations this year as the established communities start recording steady increases in landlord demands for higher rents. Locations such as Dubai Marina (a year-on-year increase of 11 per cent), Jumeirah Lake Towers (7 per cent)and Business Bay (9 per cent) had seen “strong rises” during 2021 and could be in for more.
Downtown Dubai rentals are up an average 11% while established residential locations such as the Greens and The Views – with their bigger apartments – have seen rent gains near the 20 per cent mark. Clearly, the five-year phase of subdued/falling rents city-wide has come to an end.
This is why anyone chasing lower rents will need to do so in slightly outlying destinations such as Dubai South, where a significantly higher number of new homes will be delivered this year, as well as in Dubailand, where brand new studios and one-bedroom apartments are renting for Dh28,000 to Dh40,000 on average. (Some individual landlords are still offering 12-month cheques as an incentive, going by the listings.)
At Dubai South, ready-to-move-in two-bedroom apartments are listed for Dh50,000 and thereabouts, and it could emerge as among the in-demand rental locations once the Expo closes and the area transforms into the 'District 2020' city-within-a-city.
So, there are choices available for residents to pick and choose – but as has been clear from the second half of last year, they will not have much time to make up their minds. Rents at trending residential hotspots are changing by the month, which is why Dubai’s rental market is balancing out and “start favouring the landlords after being tenant-friendly for years,” according to the latest update from the consultancy Cushman & Wakefield Core. “However, rental rises will not be uniform across the city. COVID-19 variants will continue to impact remote working, thus keeping demand for villas and larger units strong.”
Rents yet to play catch up
Apartment rents at Dubai Sports City and Discovery Gardens continue to record declines, down by 2 and 13 per cent on average last year. “With supply projections for apartments remaining high in 2022, we expect rents in suburban apartment districts to remain relatively under pressure over 2022,” the Cushman & Wakefield Core report adds.
That could well be the case, with 37,000 residential units delivered in Dubai last year and with a further 36,000 homes likely in 2022, according to Cushman & Wakefield Core. Dubai’s rental market still has some catching up to do, with much of the action centred on property sales, which delivered its best results since 2015. More Dubai residents are turning from the rental market to owning their homes, as is clear from the heavy demand for ready or nearly complete homes.
Emaar, Damac and Azizi have multiple deliveries scheduled this year, with Emaar’s Dubai Creek Harbour seeing some aggressive sales offers. “The rental market will continue to feel pressure from sales – even with mortgage rates set to rise, more residents will want to switch to owning,” said an estate agent.
According to Cushman & Wakefield Core, “The Dubai residential market continues to be led by end-users driven by the social and economic reforms along with the lowering of interest rates and LTV (loan-to-value) ratios.”
Upcoming mortgage hikes New mortgages are set to rise from March onwards, as the UAE moves in step with US rate hikes. For existing mortgage holders, especially those who took out the loans recently, the higher mortgage payouts should take time to materialise.
Peak demand for villas
Villas will retain their popularity with prospective buyers, whether it is a Dh2 million one in a suburb to a Dh100 million option on the Palm or, the currently trending location that is the Jumeira Island Bay. And prices keep rocketing as there just aren’t enough available villas to buy.
“Villa prices and rents saw sharp rises as supply in centrally located and well-established villa communities becomes limited,” said Prathyusha Gurrapu, Head of Research at Cushman & Wakefield Core. “The city-wide villa sales price average saw a 22 per cent year-on-year increase, although values are 16 per cent lower than the 2014 peak, demonstrating that values have further room for growth.
“Mirroring the soaring demand for villas across the city, the city-wide average villa rents were up by 21 per cent year-on-year while average apartment rents saw a modest 3 per cent increase.”