Blog

Due to increased end users buying real estate, Dubai’s real estate rental market is drastically changing. The way that buyer demographics are changing has become a key driver of sales, especially for purchases under Dh5 million. Landlords and renters find themselves at a crossroads as the market dynamics change, which forces a reevaluation of rental tactics and considerations for multi-year contracts.

Landlords’ Shifting Attitudes Despite Increasing Costs

For landlords in Dubai, the simultaneous rise in sales and rental prices has produced a complex situation. In the last two years, several landlords—especially those who live in rental units while owning investment properties—have benefited from advantageous circumstances. Locked into favorable rental rates following the COVID-19 pandemic, many landlords have used rental revenue to augment their rent payments and maybe even offset the mortgage on their investment property.

Tenants’ Predicament In The Face Of Rising Rental Prices

Rental costs in Dubai have increased significantly yearly by 20%, to levels never seen before. Individual salaries, however, have stayed the same at a similarly rapid rate, which might provide difficulties for tenants. Tenants have a problem because of the sharp increase in rental expenses, especially if they are considering moving.

The Need To Make Decisions Quickly In The Face Of Eviction Notices

Tenants’ plans are strongly impacted when landlords issue eviction notices by refocusing their attention on owned properties. Tenants must balance lifestyle choices and rental expenses when they have little time to make selections. Tenants now must consider purchasing and renting possibilities since the market is changing dramatically, expediting their decision-making process.

Protecting Tenants With Long-Term Agreements

Tenants are looking at measures to safeguard themselves and their tenancies in the face of increasing costs. The use of multi-year contracts is one workable approach that is gaining traction. Tenants guarantee a set rental fee for the term of the agreement by agreeing to a minimum two-year lease. Multi-year leases are frequently acceptable to landlords, especially those looking for regular profits and have no intention of selling.

Tenants benefit from stability and protection against prospective rent rises under this arrangement. Tenants will have the most minor interruption if the property is sold, as the current tenancy may be easily transferred to the new owner.

The Purchasing Market’s Allure

Going into the purchasing market is alluring for renters feeling the pinch of growing rental costs. Anecdotes from personal experience illustrate situations where extending rental agreements led to an 80% rise in monthly expenses. In these situations, tenants consider becoming homeowners since the monthly mortgage payments can be more advantageous than rising rental prices.

Off-Plan Supply’s Function In Mitigating Market Dynamics

Due to the longer life span of Dubai inhabitants, houses usually come up for sale every five to seven years. But for at least another five years, there will be a scarcity of sales and rental supplies due to the spike in owner-occupiers moving in. Although there is no chance that this shortfall would cause serious issues right now, the industry dynamics might change significantly in the years to come.

Market Prediction: A Slow Price Increase

Future expectations for the market point to a steady price rise but at a slower rate. Over the next 12 to 18 months, a consistent growth rate of around 10% to 15% is anticipated, albeit the abrupt surges seen in past years may fade. Dubai’s real estate market continues to be appealing, providing investors with a stable and changing environment.

Conclusion

The dynamic changes in Dubai’s real estate rental market require landlords and tenants to adopt flexible methods. A more complex strategy is necessary given the combination of growing rental costs, changing landlord actions, and the attraction of buying. Long-term leases provide renters security, but off-plan supply is crucial in determining how Dubai’s real estate market will balance out.