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The development of the Dubai rental market contradicts general trends for global real estate markets development, experts say. At least, this is true for some of the emirate’s areas. The reason for this situation lyes in Dubai’s housing market historical fragmentation, with different unique conditions prevailing in different parts of the city.
Middle-priced residential Dubai communities accounted for more than 20 per cent of the 5,000 new homes built and handed over in Dubai during the first six months of the year. In this case, rents in should have decreased the most in the face of fierce competition in the rental market.
But it is not the case, at least for now. Average rental rates in JVC decreased by only 9 per cent during the first five months of the year, compared with 16 per cent of average decrease in other areas of Dubai. And, according to the recent Cavendish Maxwell consultancy report, Dubai locations, where most of the new housing is being built, not necessarily experience the sharpest decline in rental rates.
Instead, as shown by Property Monitor, the highest rents reduction was recorded in such communities as , ,, as well as for apartments in IMPZ and . IMPZ (or Dubai Production City, as the area is called now) registered a decline of up to 16 per cent, while rental rates at Arabian Ranches fell by almost 10 per cent.
So why rents in Jumeirah Village Circle haven’t decreased, despite the obvious oversupply? Experts say, it is possible that property owners in the area use the novelty of the houses built as an advantage for raising rates. Therefore, the average cost of renting a one-bedroom apartment at JVC currently stands at AED55,000 per annum.
In addition, landlords also offer discounts and bonuses, providing longer rent-free periods, free chiller and fitouts at the premises for rent. And some also offer monthly payments, i.e. 12-cheques payment. This option always works well in a market, where rentals are going down.
The data released by Cavendish Maxwell, in fact, show an increase in the number of 12-cheques-offers offered during the period from January to May compared to the same period last year. This trend suggests that landlords show greater flexibility in market conditions, where tenants now win the race.
In addition, another important factor has recently emerged that landlords will have to take into account. It’s all about possible 3-years rental freezing on new contracts suggested by Dubai authorities. The Dubai Land Department and RERA (Real Estate Regulatory Agency) recently confirmed that they are developing such a plan not only for the residential sector, but also for all categories of rental properties. However, the specific timing for this decision to get grounds hasn’t yet been discussed.
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