The latest RERA rental update marks the conclusion of ‘Covid pricing’ and introduces additional changes.
The Dubai real estate market has been exceptionally active this year, despite facing several challenges. The first six months of 2024 have marked a period of significant transformation for the market and the real estate industry overall. Updates to government processes, more robust regulations, and unusual weather conditions have given residents a new perspective on Dubai.
Despite these factors, rental values have grown by 20 percent year-on-year, and prices are now 10 percent higher than the previous market peak, reflecting increased confidence among tenants and landlords.
As a company, we have experienced a rise in lead flow from Q1 to Q2 and have closed approximately Dh110 million in rental transactions alone.
RERA Index brought an end to ‘Covid pricing’
Over the past three years, rental prices in Dubai have been steadily rising. However, RERA’s Rent Calculator remained based on ‘Covid prices,’ enabling tenants to renew leases at rates significantly below the market average. This year’s update to the Calculator made headlines, as tenants now faced rent increases of up to 20 percent.
It was a crucial update for landlords in mid-market areas who were struggling to realize the investment potential of their properties.
Is it causing some disruption for tenants this year? Yes, and many are being priced out of certain areas as a consequence. However, this will lead to equilibrium by this time next year, as prices will have stabilized when current contracts are up for renewal.
More residents planning for the long-term
Another result of the changes to the Rent Calculator is that tenants, particularly those who have lived in the city for five years or more and seek greater stability, are beginning to take a long-term view of their residency.
This shift has driven many tenants to enter the buying market, as mortgage payments are often more affordable than high rents.
Those still choosing to rent are expanding their searches to areas further from the city center that have significant development potential. For example, Dubai South has become a rental hotspot following the announcement of plans to transform Al Maktoum International Airport into Dubai’s primary aviation hub.
Additionally, we have seen the introduction of multi-year contracts and increased negotiations around payment terms and the number of cheques.
Tenants know their rights
All of this has also motivated tenants to gain a better understanding of the exact rules governing tenancy contracts and how they can better protect themselves from overzealous landlords.
In the past, landlords could evict tenants without notice, and even in recent years, there have been instances of landlords attempting illegal evictions to secure higher-paying tenants.
However, tenants have become more aware of their rights and the legal protections available to them. Along with certain members of my team, I have personally worked with a few tenants on resolving disputes where the law was completely in their favor.
While I understand that landlords aim to maximize their gains in a rising market, bypassing the regulations will not be advantageous for them.
Rains provided a clearer perspective
In the first half of 2024, one significant event that stood out was the unprecedented rainfall in April, which took the UAE by surprise. Dubai swiftly recovered from this unexpected weather event, but it raised concerns among current and potential tenants regarding community security.
Prospective tenants are now conducting more comprehensive inspections of properties to ensure top-notch quality and safety standards. It’s become increasingly common for drainage issues to be a focal point of these inspections.
What to expect from H2-2024
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In my view, several factors will continue to fuel rental growth in the second half of the year. Collaborative efforts between the Dubai Land Department and property portals to reduce fraudulent listings will enhance consumer confidence. Amid political uncertainties in Europe and the US, the UAE’s status as a safe haven is underscored.
While more supply is anticipated over the next twelve months, I believe it won’t necessarily lead to price softening. Rather, we can expect sustained rental growth as more individuals worldwide view Dubai as their permanent residence.
