In the last weeks of 2022, rent increase in areas farther from Dubai’s major residential districts are speeding up, with leases for residences in Jebel Ali rising by a sizable 4% in just November. The average rent for a recently constructed two-bedroom apartment is over Dh60,000, and there is a chance that it may rise even further in the first quarter of 2023.
According to the most recent updates from the consultancy CBRE, apartments in Motor City are also experiencing a considerable surge in demand, which is reflected in a 2.6% increase in rents month-over-month in November. The master developer Union Properties recently announced additional off-plan openings in Motor City, where the typical 2-bedroom rental is more than Dh80,000. The affluent Green Community in Dubai Investments Park, where the increase in new lease agreements was an average of 4.5% in November, is experiencing the same trends.
As residents, both old and new, looking for ways to keep their rental payments in check, Dubai’s mid-market areas have taken the lead when it comes to sharp rental rises. This pattern started to show itself strongly in September. “Those tenants who could not renew their leases – and thus keep the rental increase within a certain range – had to look to the outskirts of the city to find new homes within their budget,” said an estate agent. “Plus, with a new contract, they hope to lock in their rents for 2 years.
“Jebel Ali and Dubai South keep benefiting from this, which is why rents too have started to show sizeable increases in Q4-22. Expect more rental action in these locations during 2023, with the Expo City being the other factor.”
JVC is an exception
According to the CBRE data, JVC’s rent increases in November were modest, with the gain from month to month estimated at 0.9%. There are two-bedroom apartments listed for less than Dh60,000. “One reason JVC rentals have not risen significantly is because of a steady pipeline of new handovers, both in Jumeirah Village Circle and in areas such as Al Furjan and Meydan,” said the agent. “But this could soon change if new project completions and handovers were to slow down. JVC could be the one to watch out for in 2023.”
Will landlords stick with short-stay rentals?
Rental growth in Dubai has been between 15 and 35 percent through 2022, with the first nine months dominated by luxury neighborhoods and communities. The month-over-month rises at places like the Palm by November (up 0.4 percent). According to CBRE, growth at Jumeirah (down 2.3%), Dubai Marina (up 1.2%), and JBR (up 1.7%) have slowed.
However, while rentals in The Old Town increased by 4.9 percent in November, super-prime rates in Downtown Dubai increased by 4.4%. With a 3.3% increase over October, Business Bay is still in the first place.
Some market sources say that rental increases could cool slightly in the coming weeks if more landlords decide to switch their rental units from short stays to annual leases. “A lot depends on landlord expectations – 2022 was exceptional for short-stay rentals (because of the FIFA World Cup and end-of-year demand) but 2023 could turn out to be more sedate,” said the owner of a property management company.
“Some landlords will want to go back to the security provided by annual rental contracts. If that happens a lot, then locations such as Dubai Marina and Downtown could free up more units for one-year rentals. This might stabilise rent increases.”
What should tenants do?
Tenants who are still looking for a new rental home still have options for limiting their expenses. They may still be able to secure those 1- or 2-month rent-free leases, depending on the area and structure.
Interesting offers from certain landlords include end-of-year reductions of up to 5% in addition to a 2-month rent-free period. The only need is that them to decide and sign the contracts by December 31, 2022.
They could also look for rentals farther from the city center.