No downsizing: Dubai’s tenants are upsizing to bigger flats as rents continue to fall
Dubai: Renting a spacious apartment or having a place to oneself used to be a luxury for a huge proportion of consumers in the UAE. More than ten years ago, a one-bedroom flat even in the most affordable neighbourhood could easily set one back more than Dh50,000, and upwards of Dh125,000 per annum in premium locations.
But the rental market is changing, and so, too, are the lifestyle and living conditions of the tenants. As leasing rates for flats and villas across the city have dropped year by year, people’s accommodations have gotten only bigger — and better.
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Tenants are abandoning cramped apartments and bed spaces to move into more spacious dwellings at a much affordable cost. Some of those who have scored greater deals are not just saving money on rents, they’re now living the kind of life they want — like having a private garden, a swimming pool or gym next door. And more importantly, they’re not breaking the bank.
Upsizing has indeed become the trend, and it’s mainly because landlords are realising that they’re better off lowering their asking prices than keeping an empty house. They’re also sweetening the deal by accepting multiple payments, offering three-month rent-free periods and so much more, just to keep the rental money coming in.
“The lowering of rents has had a positive impact on tenants insofar that it has balanced the increase in the cost of living, which has become a concern during times of prolonged bearish economic uncertainties,” said John Stevens, managing director of Asteco.
“[People are] upgrading to larger apartments and/ or villas. There has also been a rise in the number and range of incentives with rent-free periods now of up to three months, the absorption of agent fees, lower security deposits and the inclusion of Dewa bills, maintenance or chiller charges,” he added.
More bang for the buck
Mohammad Mordi from Egypt is one of those who are getting more bang for their buck. The 30-year-old expatriate has recently upgraded to a bigger home and saved Dh17,000 in annual rent.
Mordi was previously staying in a one-bedroom apartment, paying Dh70,000 per year in Al Barsha. Two months ago, he moved to a two-bedroom pad in Dubai Silicon Oasis (DSO), which costs only Dh53,000 a year.
The lower rent isn’t the only thing that Mordi is happy about. His new building in DSO also comes with a number of facilities like a gym and a swimming pool. “There are really good deals in the market and one has to be on the lookout for good properties,” he said.
Rents aren’t just getting more affordable for everyone in Dubai, landlords will also be unable to impose higher rents in the near future. The Dubai land Department is considering a proposal to impose a three-year freeze on rental increases.
“The rent cap which the Dubai government is proposing will further bring good news for tenants,” said Craig Plumb, head of research at JLL.
Over 40% decline in rents
Rents for freehold apartments in Dubai, from premium locations like the Palm Jumeirah and Downtown Dubai to affordable communities like International City, Karama and Bur Dubai, have been on a downtrend, falling by more than 40 per cent from their mid-2014 peaks and offering tenants a chance to upsize their living quarters.
The decline in rents over a 12-month period alone is huge for certain properties and the trend is giving tenants more freedom and options to improve their lifestyle without having to break the bank.
Deals are a-plenty
In Dubai Marina, for example, a tenant could find a three-bedroom flat for Dh120,000. That’s Dh60,000 cheaper than last year’s prevailing rate of Dh180,000 or a massive saving of Dh5,000 monthly for the occupant. In Business Bay and Downtown areas, rents for similar-sized apartments have gotten cheaper by Dh40,000.
The average rates for the first three months of the year were lower by three per cent compared to the previous quarter and 10 per cent compared to 12 months earlier, according to Asteco. And other experts agree that the trend will likely continue.
There are many factors at play, although one of the most widely discussed is that the construction of new residential towers has not eased and this has resulted in an oversupply of accommodations in the market.
“Most likely, further softening is expected for the rest of the year,” said Haider Tuaima, head of real estate for research at leading advisory firm ValuStrat. And this only spells good news for the growing tenant community in Dubai.
“A more affordable rental market generally opens the opportunity for tenants to upgrade, upscale, renegotiate renewals, relocate closer to work or school,” Tuaima added.
Rania, an expatriate from Jordan, was previously living in a three-bedroom apartment in Jumeirah Lakes Towers (JLT), paying a rent of Dh150,000 per annum.
But, thanks to lower rents, she is now staying in a plush four-bedroom independent villa with a private garden, and the rent is just within budget at Dh200,000 per annum. What is more, the rent for her villa has remained stable the last two years.
With the falling rents, Rania is now even considering buying a plush villa in Emirates Hills which will mean a further upgrade to her current home and lifestyle.
“The Meadows community is a very mature development. There are playgrounds, swimming pools, a fitness centre all nearby. I believe I have secured a real value for money deal. But with rents constantly dipping, I am thinking why not take further advantage. There are some good deals going on in Emirates Hills and I am seriously considering them,” she said.
Filipina expatriate Annie Espera said she has also been able to make massive savings on housing expenses this year. She has recently moved into a brand-new building in Al Nahda 2, close to the pond park. Her one-bedroom apartment is priced at Dh48,000 per annum and it comes with facilities like a gymnasium and swimming pool. Her rent is paid in four cheques.
Her previous flat, a two-bedroom unit in a very old building, cost her Dh56,000 a year, so with the new lease, Espera is able to save Dh8,000 per year. And even if there’s only one bedroom in the new unit, the shift is still worth it. “The second bedroom in the old apartment was very tiny and nobody slept there. The building was very old and had no facilities. So, definitely, I have been able to upgrade my house. There are fabulous deals for lease in the market, one has to take time scouting around for a good price,” she said.
Rents aren’t dropping not just within premium neighbourhoods outside the city centre or in budget-friendly areas near the Sharjah border. Even the sought-after communities like Downtown Dubai, the home of the world’s tallest tower, is offering great deals as well.
Christopher, an expatriate from France, left his two-bedroom flat at Burj Residences that cost him Dh145,000 per annum last year. The reason is that he’s found a better offer from a landlord in the Old Town area, and he also desperately wanted to get away from the construction site in front of his previous flat.
The new apartment, also with two bedrooms, has a private garden and is surrounded by a well-maintained landscaped greenery. It’s also just a few steps away from two community swimming pools that offer stunning views of Burj Khalifa.
And what’s more, the rent is Dh15,000 cheaper, at Dh130,000 per year, which is already a great deal considering that other landlords in the area were advertising their two-bedroom flats for a little over Dh200,000
“It’s very quiet and it has good amenities that are well maintained,” he said, when asked what he likes about the area the most.
Some tenants are opting to stay as landlord drop yearly rates
And, while others are upbeat about moving to bigger homes or improving their lifestyles, there are those who are happy to stay, as landlords have offered significant reductions in leasing rates.
Indian national Nabeel Mahmoud, 37, said he has seen a massive rent drop in the last one year for his two-bedroom apartment in Remraam. From paying Dh85,000 per annum last year, Mahmoud has been able to negotiate a great deal with his landlord to lower this rent to Dh78,000 per annum.
“There are other similar-sized apartments in Remraam that are even going for Dh75,000 per annum.”
“My wife and I are happy living here and the fact that our landlord is reasonable, we plan to stay here for some time. We are extremely relieved with the rental drop, it is a huge saving in our pockets,” said Nabeel.
Indian, Mohammad Zubair, 36, has lived six years in the same building in Al Nahda 2. The reason being is that there has been no major shift in rental prices in the last few years.
He is currently paying Dh42,000 per annum for a two-bedroom apartment in Al Nahda 2. When he moved there six years ago, the rent on his apartment was going at Dh38,000 per annum, marking a mere 1.1 per cent increase. “But the rent has remained the same in the last two years,” said Zubair who lives with his wife and five-year-old daughter in Al Nahda.
Indian Nandini Shekhawat, 40, who is living in a three-bedroom apartment in The Gardens, said her rent fell to Dh93,500 per annum from Dh104,000 per annum last year. As per her latest tenancy contract which she signed last month, Shekhawat has also been able to negotiate for a more flexible payment plan.
She will now pay her rent in six cheques, compared to four cheques last year. “The Gardens, developed by Nakheel, comprises of 129 low-rise buildings with 3,828 apartments of one, two and three bedrooms. The community development comes with lush landscaped gardens, playgrounds, tennis and basketball courts, swimming pools, 24-hour security and we are very happy living here,” she added.
Where rents are headed
Industry experts have agreed that the downtrend will continue this year, so tenants will continue to save money on housing expenses and enjoy more power at the negotiating table.
“Rental rates are expected to record further decreases predominantly due to continuous delivery of new supply and prevailing soft market conditions amidst limited business or employment growth,” Stevens added.
“Most likely, further softening is expected for the rest of the year,” added Tuaima.
According to JLL, government initiatives, coupled with private sector efforts, are likely to stimulate demand and drive Dubai’s real estate market.
Plumb estimated that the rents will likely decline further by between five and 10 per cent across properties in Dubai. He said tenants will either negotiate hard on their existing rental contracts or they will look at upgrading to bigger and newer places.
“It is anticipated that rents will dip to their lowest in 2020. Added to this if the government freezes rents for another two years, tenants will benefit all the way for the next three years.”
“There is a massive opportunity awaiting tenants and they have a lot to achieve.”
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