According to experts, the surge in Dubai’s real estate market leading to increased rents is motivating residents to either downsize, move to more budget-friendly neighborhoods, or invest in property.
Rent hikes in Dubai are driving residents towards property ownership, as monthly rent payments align with mortgage costs, according to experts interviewed by Arabian Business.
Real estate agencies note a growing trend of tenants relocating, downsizing, or seeking cheaper areas due to escalating rents, particularly after consecutive years of increases. While Dubai is projected to see a 20 percent rise in rents this year, certain areas have already witnessed surges of up to 66 percent.
“In some instances, tenants are being priced out of their current residences, necessitating relief measures,” stated Louise Heatley, Owner and Managing Director at Exclusive Links Real Estate Brokers.
Heatley further highlighted the affordability of properties in areas like JVC, where monthly mortgage payments can equate to previous rental expenses. The heightened demand in such areas is also pushing tenants towards Arjan, Al Furjan, and DAMAC Hills.
Exclusive Links Real Estate Brokers encountered cases of clients opting to leave Dubai due to rent increases, with one example being a move from a 2-bedroom apartment in The Greens to a 4-bedroom villa in RAK.
Similarly, Betterhomes, a Dubai-based agency, observed tenants opting for smaller properties, reflecting a growing trend. Jacob Bramley, Senior Leasing Manager at Betterhomes, noted tenants’ decisions to either downsize within their current community or explore properties in other areas.
The recalibration of the rental index calculator has empowered property owners to seek larger rent increases, prompting tenants to reconsider renewal options, Bramley explained.
To consider purchasing homes—adding pressure to rent hikes as available supply diminishes due to expats buying properties for residency rather than investment.
“Residents in higher income brackets are naturally weighing the option of buying to enter the property market, as they may have the means to support the required deposit,” Heatley stated.
“While more budget-conscious residents must factor in the overall increase in the cost of living, at Exclusive Links, we often advocate for buying over renting, as in most cases, it proves more financially beneficial in the long term,” she added.
Communities in the more affordable mid-price segment, like Jumeirah Village Circle (JVC), are experiencing the most strain due to rent escalations over the past 12 to 18 months. The agency has witnessed a surge in tenants inquiring about purchasing the property they currently rent, particularly in the mid-market price range.
Many are also exploring older, centrally located communities, such as townhouses in The Springs and more economical apartments in Dubai Marina.
According to Svetlana Vasilieva, Head of Secondary Sales at Metropolitan Homes, Dubai residents are increasingly inclined to buy ready-to-move-in properties rather than continue renting or downsizing, given their growing frustration with rising rents.
Frequent rent hikes have made budgeting challenging for many, creating a sense of instability. Purchasing a property with a fixed monthly payment offers a more predictable financial arrangement compared to the fluctuating rental market.
Vasilieva noted that the UAE’s expanding economy and its status as a secure destination are drawing in new residents, particularly with the forthcoming expansion of Al Maktoum International Airport, forecasted to accommodate over a million individuals. This heightened demand is surpassing the current housing supply, resulting in escalating rental rates.
Dubai rents will continue increasing as market attracts more buyers
As Dubai’s real estate market thrives, it remains a magnet for both investors and buyers.
The first quarter of 2024 witnessed unprecedented activity, with Dubai securing over 34,000 transactions, marking a 20 percent increase from the same period in 2023.
Experts foresee a continued uptick in rental prices. “Our robust inquiry volume reflects strong demand for rental properties, especially given Dubai’s growing population. This suggests prices will likely rise further this year,” noted Bramley from Betterhomes.
He predicts that escalating rents will nudge more residents towards property ownership. “Dubai’s appeal as a long-term residence is growing, making it financially prudent for residents to invest in their own homes rather than rent indefinitely.”
According to Vasilieva of Metropolitan Homes, the market will witness a surge in buyers over the coming years. “This is driven by escalating rental rates and a consistent rise in property sale prices. Additionally, the emergence of new master communities with comprehensive social infrastructure is attracting more potential buyers.”
Source : Arabian Business
