The Dubai Rental Index has been updated to reflect the recent increases on residential rentals in the city, allowing landlords and tenants better clarity through the whole leasing process. This applies more to existing leases getting renewed, which means there is less stress for landlords and tenants alike.
But on leases featuring new tenants, landlords have greater flexibility on what they can demand. This is where potential tenants are facing demands anywhere from 20-30 per cent above what they are paying, as landlords try to make maximum use of sustained demand chasing fast depleting options. In some of the more sought after residential locations, occupancy levels after summer could drop well below 10 per cent, say estate agents.
On rental hikes, landlords wanting to increase more than the average for a particular location can make a submission with the authorities. “We understand the Dubai Rent Dispute Settlement Centre (RDSC) allows landlords to apply for rental valuations of their properties on a case-by-case basis,” said Manali Sangoi, Associate at the law firm Hadef & Partners.
“In (some) instances, we understand the RDSC permits rents to be increased to the valuation identified in the rent valuation certificate procured by the landlord. This may go beyond the amount stated in the Index, but provided that a 90-day prior notice for rent increase was served by the landlord. We have asked the RDSC to clarify this.”
We understand the Dubai Rent Dispute Settlement Centre (RDSC) allows landlords to apply for rental valuations of their properties on a case-by-case basis - Manali Sangoi, Associate at the law firm Hadef & Partners.
Rent index update This is why the Dubai Rental Index getting updated is of such significance, because key locations have gone through 20 per cent increases between last year and now. Some popular district/neighbourhoods have also seen a slowdown in the rate of increase, but for tenants that will only offer cold comfort because they would still have paid the hiked rentals on renewals or new contracts.
Sharp rent gains, limited supply options In Dubai, the rental market has already reached a point where landlords call the shots. “City-wide villa rents (are) up by 25 per cent and apartments up 12 per cent year-on-year (on average),” said David Abood, Partner at Cushman & Wakefield Core, the property consultancy. “Plus, centrally located (residential) stock is seeing higher occupancy levels.
This has led most incumbent tenants to stay in their current homes and take the help of the RERA rental calculator to limit their rental increases. - David Abood, Partner at Cushman & Wakefield Core.
Will more supply help? So far this year, there has been a regular supply of newly completed buildings in Dubai and with more waiting to join in the final four months. Many of these units are destined for the rental market – but some landlords are also placing units for the short stay/holiday home leasing.
“This has effectively meant a further cut in available rental properties for one-year leases, and adds more upward pull on rates,” said an estate agent. “The last quarter could see a further spike, and that’s based on the enquiries we have been getting, many from first-timers waiting to be residents in Dubai.” 1. Dubai's Article 1 on rental increases provides:
- No rent increase, where the rent of the property is up to 10% less than the average rental value of similar units;
- A 5% increase where the rent is 11-20% less than the average;
- A 10% increase where the rent is 21-30% less than the average;
- A 15% hike where the rent is 31-40% less than the average; and
- A 20% increase where the rent is more than 40% lower than the average rental value at similar units.