According to figures from online portal Propertyfinder (www.propertyfinder.ae), average rents per square foot have fallen across virtually all communities in Dubai. In the 12 months from July 2016, Downtown Dubai saw a decrease of 7.8 percent, with rents recorded at Dhs118 per sq ft, down from Dhs128.
The biggest declines were seen in Jumeirah Village Circle, where Propertyfinder data records that average rents have fallen by 11.3 percent in the 12 months from July 2016, making them Dhs71 per sq ft this year, down from Dhs80 per sq ft.
The most interesting dips have been on the Palm Jumeirah, where rents have decreased by 9.8 percent year on year. Rents on the man-made island now stand at Dhs92 per sq ft on average, down from Dhs102 per sq ft, putting them on a par with rents in JLT (Dhs93 per sq ft), JBR (Dhs92 per sq ft) and Business Bay (Dhs91 per sq ft).
According to data from Property Monitor by Cavendish Maxwell, in the first half of this year, average rents for a one-bedroom apartment in Downtown Dubai reduced from Dhs117,296 to Dhs112,401. In Jumeirah Village Circle, meanwhile, they’re down to Dhs65,575 from Dhs70,000.
Meanwhile, the average for a one-bedroom in JLT is Dhs80,343, down from Dhs86,113, JBR Dhs117,958, down from Dhs124,700 at the start of the year, while rents in Business Bay stand at Dhs81,740, down from Dhs91,750 at the start of the year. Conversely, Palm Jumeirah appears to be bucking the trend, with prices (according to the same Property Monitor data) now at Dhs141,758 for a one-bedroom, up from Dhs128,694 at the beginning of the year.
There are a number of reasons why the market has seen a lot of movement at the same time as a general decline in rental values, but it primarily comes back to that age-old conundrum of supply and demand. While there is still demand, the amount of supply currently coming onto the market far outweighs it, which has caused rents to dip, as potential renters now have more choice.
“Dubai’s rental market has continued to soften over the past 12 months, driven by rising new supply levels,” says Green. “This is helping to form a tenant-driven market, whereby occupiers are able to negotiate more attractive terms with landlords, particularly for new leases, with lower rental rates and a higher number of cheques negotiable across many locations,” he says.
However, he adds that tenants on existing leases are generally not finding the same level of flexibility from their landlords, which could also be the cause of those record numbers of people deciding to move. “But rental increases on lease renewals are becoming less prevalent,” Green notes.
Nevertheless, it’s a tenant’s market at the moment. “Landlords are now accepting an increased number of cheques,” Kelly concurs. “And in some communities, incentives are being put out there for prospective tenants, such as 13 months’ rent for the price of 12, and white goods being added to the property if it doesn’t already have them, so there is less of a cost to the tenant.”
Firozi agrees. “Over the past year tenants have gained an upper hand while negotiating contracts, getting more favourable terms,” he says. “In some cases, we’ve seen landlords offering rent-free periods and the payment of agency fees in order to entice tenants.”
Lukman Hajje, group CCO of Propertyfinder, also points out rent-free periods being passed on to tenants, and Green highlights this as a trend. “The main trends at the moment relate to the evolution of a tenant’s market, with negotiable rents, a higher number of cheques and even rent-free in some cases. There’s also a continued shift towards affordability, with tenants typically becoming more cautious with their housing requirements and/or looking for value in secondary locations, such as Jumeirah Village Circle or Reem.”
Another notable trend is among property owners with mortgages, who Firozi says are now responding differently. “They are more likely to reduce the rents on their properties to tempt tenants, rather than enduring a prolonged period without any rental income,” he says.
So the past 12 months have been tricky to say the least. There have been some vast changes and landlords have had to adapt, as painful as that might be. “We have to remember that as good as cheap rents are, a lot of landlords aren’t big companies or multiple investors, so there is pain in the market currently,” says Kelly.
Hipkin feels that if landlords take a strategic approach, some of this pain can still be alleviated. “Landlords are more aware that if they decline a fair offer from a potential tenant they could lose that to a neighbouring [landlord] who is willing to accept that same offer,” he says. “So landlords stand a better chance of negotiating if their property is listed exclusively with one agent, they have a unique or rare property, it’s immaculate and well-maintained and is upgraded to a high standard.”
However, regardless of this, some agents feel there is still more pain to be felt, as the market could have further to fall. Green says that he expects to see “further widespread deflation of rental rates in H2 2017 and into 2018, as new supply is delivered, and as available options for tenants increase.”
Hajje agrees. “There is room for rents to come down further, with figures beginning to bottom out in 2018 or early 2019, and demand expected to increase in the lead up to 2020.
Others are more cautiously optimistic, feeling that the decline in rents for many freehold communities has already started to slow down and/or bottom out. “We expect rents to be stable over the next quarter,” Firozi says.
So what shape will the market be in come 2018? Hipkin says the future looks bright. “Dubai is arguably the fastest-growing city in the world and it seems to be staying that way for the foreseeable,” he says. “I can’t see much change in rental rates over the next 12 months, as although Dubai is a fast-growing city, there are a host of new properties being handed over to the market, which should even out supply and demand.”
This is a sentiment echoed by Kelly. “I don’t think we will see the same kind of drop in the market again,” he says. “There will be more handovers coming up, but as we get into 2018, we’ll also see things start to ramp up for Expo 2020, which will create a lot more jobs and bring a lot of people to Dubai. I would expect small drops and then a stabilisation of the rates.”
Some agents are even quite bullish. “We expect rents to stop declining in some communities over the next 12 months and may even begin to see increases in some communities such as Dubai Marina and JLT,” Firozi says. And with Expo 2020 on the horizon, he believes that more new jobs will be created, thereby increasing demand. However, he adds a caveat. “Around 27,000 new apartments are expected to be added in 2018, which could put some pressure on rental prices,” he says.
But there is good news. While rents for studios and one-bedrooms have been in decline, rents for larger properties – two-bedrooms in Dubai Marina, Business Bay and Downtown Dubai, and two- and three-bedroom apartments in JBR – have actually increased over the first six months of the year, according to figures from Property Monitor by Cavendish Maxwell (see table on page 23). Perhaps tenants are taking the opportunity to move from smaller, individual properties and opting to share in larger, more desirable spaces, driving demand for such properties up, and supply of smaller properties down.
Dubai Marina has weathered the storm relatively well, seeing only a 4.7 percent decrease in rental values in the 12 months from July last year, according to Propertyfinder data. JLT also saw the lowest decrease in rents, with just a 3.1 percent dip over the same period, while a CBRE report put Business Bay in the same league.
“Dubai Marina still holds the title as the most sought-after residential area in the city,” says Firozi, who adds that 36 percent of all Better Homes’ rental contracts in Dubai fall under apartments in the Marina, followed
by JLT and JBR.
“We still have the main players in terms of the most popular areas,” says Kelly. “The Marina still comfortably holds onto top spot and is a top choice for the sheer amount of things to do right on your doorstep. Downtown, Business Bay, Sports City, Motor City and the Palm are also communities that maintain a position among the most popular.”
So, the past 12 months have been tough, but there is a glimmer of hope in the market’s eyes. Rents are starting to bottom out and the looming shadow of Expo 2020 looks set to bring very good things for the emirate. In the meantime, there are plenty of deals for tenants to take advantage of, and landlords must hold their reserve. The present may look a little gloomy for property owners, but the future, at least, looks bright.
Know your rights
Moving home? Read these top tips from Mario Volpi, chief sales officer at Kensington Executive Properties, on getting the best for your bucks
Before signing an agreement, check the following:
1 Before embarking on their search for their next home, tenants should ensure they are dealing with a reputable licensed RERA agency/agent. This can be easily checked by requesting the trade and RERA licenses or by visiting the Land Department’s website, www.dubailand.gov.ae.
2 Verify who the owner actually is. Ask to see copies of the title deed and passport. In the case of a representative, ask to see the power of attorney documentation, which also needs to be attested and valid.
3 Ask who is liable for chiller fees. Typically these are the responsibility of the landlord where properties have centralised A/C, but there are certain areas of Dubai where chiller fees are charged separately.
4 Make sure that the landlord is up to date with the maintenance fees. This will ensure that you will not be subject to any disruption to services or access to gyms, pools etc.
5 Ask what the strategy is for the maintenance or upkeep of the property should anything go wrong. The landlord is normally responsible for any major maintenance and the tenant is responsible for minor. To clarify, major maintenance is often regarded as anything that would cost Dhs500 or more and minor less than Dhs500.
6 Double check all the terms and conditions, notice periods, early termination of a contract, penalties etc. make sure all eventualities are mentioned in the contract.
7 Check the property thoroughly by doing a condition report. This will ensure defects are rectified at the start of the tenancy and highlight any issues before moving in to ensure responsibility is the landlord’s.
More useful points to consider:
• Check the asking price by doing research on the area to ensure you are not overpaying. Remember, though, that there is a difference between an ongoing rental price i.e. a property with a tenant in situ, and a vacant market price rent. The latter is always going to be higher, so don’t just ask neighbours what they’re paying in rent as this will not necessarily help you.
• Do your research on the area. Does it fit your lifestyle in terms of what it has to offer such as leisure, transport etc?
• This of course depends greatly on the actual situation, but provided the tenant is keeping within the law in terms of occupying the property, the tenant has the right to claim any unfair or unjust situation against him by filing a case at the rental dispute settlement committee. I would always advise negotiating with the landlord in the first instance before opening any case at the RDSC.
• If there is no provision in the contract for early termination, the tenant is then at the mercy of the landlord to find an amicable solution should they need to break the contract. It’s important to have all eventuality clauses mentioned in the contract, because one never knows what will happen in the future.
• There is a misconception that tenants have to give 90 days’ notice when not renewing their contract. In the past, this was the case, but Law 33 of 2008 amended Law 26 of 2007, removed this need. Many landlords are not aware of this change so continue to penalise tenants who do not give this amount of notice when not renewing. In reality, a tenant actually does not have to give any notice if they are not renewing. This would appear unfair to a landlord, but no law is being broken if no notice is given.
• Subleasing is strictly not allowed unless the landlord is aware and has agreed.
• Pets. Make sure that permissions are granted for tenants with pets, especially dogs. These permissions should be given not only from the owners/landlords but also from the building’s owners’ association if the property is an apartment, and even from the municipality.
• Organise the disconnection of any utilities from your old property.
• Apply for new connections.
• Sign up for Ejari (you will need this to connect DEWA).
• Remember to request NOC permissions from developer for removals logistics.
• Clear all outstanding dues with existing landlord (if any).
• Research and engage removal company.
• Enquire what provisions the landlord has in terms of building insurance, although this is often covered by the building management. In addition to this, tenants ought to take out contents insurance that also covers the cost of rehabilitation in case of fire or flood.
Top tips for choosing an insurance policy
The UAE is one of the safest places to live on the planet – but that doesn’t mean you shouldn’t be prepared for that worst case scenario.
It is easy for complacency to creep in when it comes to insuring your home – particularly if you are renting rather than own the property – but it could be a costly oversight in the event of an incident.
We have enlisted the expert advice of David Harris, director – affinity and director for UAE and Bahrain at RSA Insurance, to get some reassurance about insurance.
Tailor your policy to your needs
Home insurance policies can cover everything from an earthquake to a water leak, so it is essential to ensure you plump for the coverage that suits you best, says Harris. Insurance policies can be drawn up to cover just the home structure or the tenant’s belongings (such as jewellery, furniture, electronic appliances and so on).
Understand what you are signing up for
Before signing on the dotted line do your own research into the insurance firms out there (such as their reputation in the market) and make sure you cast a keen eye over all of the terms and conditions. It might be tempting to go for the cheaper option, but this could cost you more in the long run if you have to make a claim.
Make checks before making a claim
Before jumping in and making a claim, complete you own check-list to ensure you are fully covered, says Harris.
And you should always carefully read your insurance documentation before lodging your claim.
He says: “Check the policy schedule and policy wording to see whether the loss or damage is covered and if any specific evidence is required. Read the policy conditions and general exclusions, and follow any instructions given.”
Harris adds that claimants should inform police immediately if property has been stolen or deliberately damaged or if you have lost a valuable item.
He says detail is key, so get on the phone to the claims team as soon as you can to get your claim on record.
He adds: “Contact the claims team on the numbers provided in the policy document, they will take as many details as possible over the phone. A claim form may have to be filled, which should be completed and returned with all the required supporting evidence to the insurance company.”
To make sure a bad situation doesn’t get worse, it is important to arrange for repairs swiftly when necessary.
Harris says: “Whenever necessary, arrange for emergency repairs to be carried out in order to prevent further damage to the property.”
For more information, visit www.rsadirect.ae.
Tips for avoiding a claim
1 Always remember to lock your doors.
2 Check the water pipes in the house.
3 Install and maintain fire alarms.
4 Examine the electrical appliances at home with the help of an electrician.
5 Unplug the appliances that over-heat the electric sockets.
6 Do not leave things on the stove unattended.
7 When you go away, have someone watch over your home.
Harris’ Ten top tips
1 Keep complete records of your insurance policies, premiums paid, loss records and loss recoveries.
2 Check the tenancy agreement for any tenant’s liability requirement.
3 Use a safe to store precious items.
4 Rent payable or rent receivables should also be insured.
5 Keep receipts for major items for proof at the time of claim.
6 You should insure any furniture, fixtures, musical instruments, sports equipment, jewellery etc.
7 Building value should be declared on reconstruction and not on market value.
8 Annually review and update your home inventory. Always update your inventory when you buy new items.
9 Any electronic, mechanical or business equipment should be declared if kept at home.
10 When your home is at risk, it does not matter whether you own the home or you’re just renting it, therefore, it is vital for an expat renting a house to purchase insurance.
Coming soon to Dubai’s property market
Bluewaters Island by Meraas
The development will see around 700 apartments completed by Q3 2018.
Town Square by Nshama
(Emirates Road/Al Qudra Road) will see around 2,773 mid-end apartments delivered by 2018.
around 572 apartments and 16 townhouses are expected to be delivered in 2018.
Around 3,728 (1,990 serviced) apartments are expected to be delivered in 2018.