Rent price increases are pushing Dubai residents to buy as monthly rent payments “match” mortgage costs, experts told Arabian Business.
Real estate agencies are also beginning to see more tenants move out of Dubai, downsize, or move to cheaper areas due to the rent price hikes, especially if they were hit with an increase over consecutive years. While rents are expected to increase by 20 percent in Dubai this year, the property market has already seen rents in some areas surge by as much as 66 percent.
“In some cases, tenants are getting priced out of their current property and there is a need for this to be addressed offering some relief for tenants,” Louise Heatley, Owner and Managing Director at Exclusive Links Real Estate Brokers.
“In JVC, you can buy an affordable property where today’s monthly mortgage payments can match yesterday’s monthly rental payments,” she added. The increasing demand for properties in this area is also pushing tenants to look at Arjan, Al Furjan, and DAMAC Hills.
Her agency has even come across cases of clients choosing to leave the emirate altogether as a direct result of the rent hikes.
“A recent client has chosen to leave his 2-bedroom apartment in The Greens and move to a 4-bedroom villa in RAK. Moves like this, further out of Dubai are all supported by the improved transport infrastructure,” said Heatley.
Dubai-based agency Betterhomes has also observed a number of tenants choosing to move into smaller properties. “This is a trend that we have been observing in increasing frequency. Tenants’ decision is to either stay in their chosen community and downsize or expand their search to consider properties in communities outside their ideal location,” said Jacob Bramley, Senior Leasing Manager at the agency.
The recalibration of the rental index calculator has meant that property owners have been able to request a much more substantial increase in rent than in previous years.
“Tenants are giving more serious consideration to whether they should renew at that rate or opt for a more affordable option elsewhere,” Bramley explained.
On renewal, landlords are trying to push rental prices up by the maximum 20 percent increase allowed, said Heatley. This has put a lot of pressure on tenants, leading many to consider buying homes – which is adding to rent hike pressures as available supply in the market is gradually decreasing due to expats buying properties to live in rather than as investments.
“Residents in the higher income bracket are naturally considering their options to buy and get onto the property ladder as they may be in a position to support the deposit required to pay,” said Heatley.
“More budget-conscious residents need to take into consideration the bigger picture including the increase in the overall cost of living but at Exclusive Links we are often putting forward the argument to buy vs rent as in most cases, it makes better financial sense in the long run to buy,” she added.
Communities in the more affordable, mid-price segment of the market such as JVC, are “feeling the pinch most” due to rent increases over the last 12 to 18 months, she said. The agency has seen a surge of tenants enquiring about buying the property they are renting, especially in the mid-market price range.
Many are also considering older communities in central locations such as townhouses in The Springs and more affordable apartments in Dubai Marina.
According to Svetlana Vasilieva, Head of Secondary Sales at Metropolitan Homes, Dubai residents are looking to buy read-to-move-in properties instead of continuing to rent or downsize as they become more “frustrated with rising rents.”
Frequent rent hikes have made budgeting difficult for many, creating “a sense of instability,” she said. Buying a property with a fixed monthly payment that does not fluctuate with market changes as much as rents tend to.
“The UAE’s growing economy and reputation as a safe haven attract new residents, further fuelled by the upcoming expansion of Al Maktoum International Airport, which is expected to bring over a million people. This surge in demand is outpacing available housing, leading to rising rental prices,” Vasilieva added.
Dubai rents will continue increasing as market attracts more buyers
This comes as Dubai’s booming real estate market continues to attract strong demand from both investors and buyers.
The first three months of 2024 broke previous records for the real estate market as Dubai attracted a major influx of investors and secured more than 34,000 transactions — up 20 percent compared to the same period in 2023.
As a result, experts anticipate that rent prices will only continue increasing.
“Our high volume of inquiries demonstrates a strong demand for rental properties, especially with the rising net migration to Dubai. This trend suggests that prices will likely continue to increase throughout this year,” said Bramley of Betterhomes.
He believes the ongoing rent hikes will continue to drive residents to consider buying. “Dubai is becoming increasingly attractive as a long-term place to live, making financial sense for residents to invest in their own property rather than renting year after year.”
Vasilieva of Metropolitan Homes expects the market to see an influx of buyers over the next few years. “This is due to two key factors: rising rental prices and a consistent increase in sale property prices. Additionally, the development of new master communities with strong social infrastructure, such as schools, malls, and hospitals, is attracting a higher number of potential buyers,” she said.
Follow us on
