The Dubai real estate market has been busier than ever this year, though not without its share of challenges. I think the most notable thing about the first six months of 2024 is that they have marked a period of change for the market – and for the real estate industry as a whole. There have been updates to government processes, regulations have been made more robust, and we saw some highly unusual weather that cast Dubai in a new light for many residents.
In spite of all these factors, we have seen a year-on-year growth of 20 per cent in rental values and prices are 10 per cent higher than the previous market peak, which shows growing confidence amongst tenants and landlords.
As a company, we have seen increased lead flow from Q1 to Q2 and closed approximately Dh110 million in rentals alone.
RERA Index brought an end to ‘Covid pricing’
While Dubai’s rental prices have been surging upwards over the past 3 years, RERA’s Rent Calculator has been tethered to ‘Covid prices’, allowing tenants to enjoy rent renewals that were well below the market average. This year’s update to the Calculator understandably dominated headlines as tenants now had to reckon with increases as high as 20 per cent to their current rents.
It was a much-needed update for landlords in mid-market areas who were unable to realise the investment potential of their properties.
Is it wreaking a bit of havoc for tenants this year? Yes, and several of them are getting priced out of certain areas as a result, But it will all lead to an equilibrium at this time next year as prices will have levelled out by the time current contracts are up for renewal.
More residents planning for the long-term Another upshot of the changes to the Rent Calculator is that tenants are starting to take a long-term view of their residency, especially those who have been in the city for 5 years or more and want a greater sense of stability.
This has pushed quite a few tenants into the buying market as mortgage payments, in many cases, provide a more cost-effective option to higher rents.
Those who are still opting to rent are branching out in their searches, looking at areas that are further out from the centre of the city but have plenty of development potential. Dubai South, as an example, has become a hotspot for rental activity after plans were announced to transform Al Maktoum International Airport into Dubai’s main aviation hub.
We have also seen the advent of multi-year contracts and more negotiations around payment terms and number of cheques.
Tenants know their rights
All of this has also motivated tenants to develop a better understanding of the exact rules governing tenancy contracts and how they can better protect themselves from the actions of overzealous landlords.
There was a time in the now distant past when landlords could evict tenants without notice, and even in recent years, there have been cases of landlords attempting illegal evictions to get a higher paying tenant.
However, tenants have become more aware of their rights and the legal protections afforded to them. I have, along with certain members of my team, personally worked with a few tenants on resolving disputes where the law was 100 per cent in their favour.
While I do appreciate that landlords want to make the most of a rising market, circumventing the rules will not be to their benefit.
Rains provided a clearer perspective
No recap of the first six months of 2024 can be complete without mentioning the record-breaking rainfall that we saw in April – an event that caught the entire UAE completely unaware. While Dubai did recover from the event with remarkable speed, there were lingering questions for existing and prospective tenants around community security.
Tenants are more thorough in their viewings and inspections of homes now to ensure the highest standards of quality and safety. It perhaps goes without saying that questions about drainage have become a bit commonplace now.
What to expect from H2-2024
There are several factors that will, in my opinion, continue to drive rental growth in the second-half of the year. The Dubai Land Department is working in conjunction with property portals to cut down on fake listings, which will build more consumer trust. Political uncertainties across Europe and in the US only help to underscore the UAE’s position as a safe haven.
More supply is expected to come in over the next twelve months, but will it soften prices? I don’t think so. We will see sustained growth in the rental space as more people around the world see Dubai as their long-term home.