Dubai rents soar 55% in 4 years; hunt on for cheaper options
Dubai - Rents in the mid-income housing segment have appreciated twice as much as their high-end counterparts.
Published: Sun 10 Jan 2016, 5:16 PM
Last updated: Mon 11 Jan 2016, 2:08 AM
Does low-cost housing in Dubai only exist on paper? Tenants who are looking to upgrade accommodation or who have just moved to Dubai may find it increasingly difficult to find affordable homes in popular communities. However, tenants on historic leases still continue to enjoy the benefits of below-par market rents.
Also read: Funny real estate queries Dubai's property agents deal with
But consider this irony. Rents in the mid-income housing segment have appreciated twice as much as their high-end counterparts.
No discrimination please It is common knowledge that certain landlords in Dubai discriminate between nationalities when they rent out apartments. They often specify nationalities.
"It is quite normal whereby landlords only want European tenants and will not accept anyone else," said Manish Khatri of SPF Realty. "It is sometimes hard for Emirati families to rent as many landlords don't want to rent to them as they are worried about getting their rent. This applies to bachelors as well. Landlords seek full details, employment letter, etc. and make it clear that no sharing is permitted. In case of married couples, they ask for marriage certificates so they don't have any issues with Shariah compliance."
Elysian Real Estate's Dounia Fadi said: "We get told by some landlords that they will not rent their property to specific nationalities. Landlords prefer families when it comes to larger properties to avoid having multiple occupants who end up sharing the property, which is illegal as per the UAE law. For smaller units, landlords have no objections to rent to bachelors."
"Dubai Marina rents have appreciated by 50 per cent since 2011, whereas International City rents have appreciated almost twice as much - 93 per cent," says Hussain Alladin, head of research, GCP Properties. "Since 2011, Dubai city-wide rental indices have appreciated by 55 per cent."
Echoing his view, Declan McNaughton, managing director of Chestertons UAE, says: "Rents have doubled in most areas during the last few years. Locations such as International City and Dubailand offer affordable option for residents starting at Dh30,000 per annum."
Rise in rents in affordable communities boils down to a lack of supply. The year 2015 saw a handful of developers acknowledging this pent-up demand and launching 'affordable' projects. However, there is a caveat.
"These projects may have attractive price points, but in order to maintain margins, developers have decreased sizes. For Dubai to truly have affordable housing, a reduction in square foot rate is necessary," says Alladin.
It is also important for developers to impose long-term restrictions on resale. This will restrict speculative activity and keep prices affordable.
High down payment requirement on mortgages by banks make most properties unaffordable for middle-income expats. Developers can pitch in with innovative payment schemes to help buyers surpass bank financing.
"Only a small percentage of the resident population can afford mortgages in Dubai, which is quite a challenge for the market's long-term sustainability. There is clearly an issue with demand here which is severely hampered due to regulatory policies," adds McNaughton.