Dubai tenants opt for smaller flats within city amid record high rents, growing demand

New property units in Dubai are approximately 12.5 per cent smaller than older ones

by

Waheed Abbas

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Phot: AFP file
Phot: AFP file

Published: Sun 19 May 2024, 2:27 PM

Last updated: Sun 19 May 2024, 9:47 PM

Tenants in Dubai are increasingly choosing to relocate to smaller houses within the city as rents remain at a record high in many areas.

Industry executives said the inflow of young professionals and smaller families is fuelling the demand for smaller houses while landlords also prefer such units as they are more affordable, easy to rent out and provide robust returns on investment.


Meanwhile, residents looking for larger units are moving to the outskirts of the city where they are still somewhat affordable. As reported by Khaleej Times earlier, people are increasingly opting for larger properties at lower price points on the outskirts owing to high rates in established Dubai communities.

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Additionally, the size of new property units in Dubai are also smaller now -- by approximately 12.5 per cent -- than older ones even though prices have gone up substantially in the post-pandemic period.

The rising plot prices – which have jumped over 60 per cent in the past 12 months – have also prompted developers to introduce smaller units to maintain high margins.

Property prices and rents have been consistently on the rise after the coronavirus pandemic, surpassing their 2014 peaks. It is estimated that rents in Dubai’s prime areas will see a 20 per cent jump this year as the population continues to increase in the emirate, driving demand for properties.

Jacob Bramley, senior leasing manager at Betterhomes, said price-sensitive tenants are indeed exploring smaller units, especially considering that newer developers tend to offer smaller properties compared to those completed over a decade ago.

Sachin Kumar Singh, business head and managing partner at Foremen Fiefdom, said rent hikes are putting a strain on tenants, forcing them to make tough choices.

“Many are finding smaller units more attractive due to lower cost, leading to an increased demand for these spaces. This trend is also influencing new developments, with a rise in mid-market apartment buildings catering to those priced out of larger units. While this adds to the overall rental supply, some critics argue it introduces speculation into the market,” Singh said.

He suggested that the affordability challenge highlights the need to re-evaluate rent stabilisation mechanisms.

“Effective mechanisms can provide relief by encouraging an increase in the total number of rental properties and by placing some limitations on rent hikes to prevent them from causing major disruptions in the market.”

According to Usama Sukhera, leasing team leader at Huspy, smaller units are ideal for young professionals moving here for the first time and those with small families.

“While these remain relatively affordable, from an investor standpoint, the low purchase costs together with the high demand ensures that studios and one-bedroom apartments provide robust returns on investment for landlords.”

Sukhera added that now with the availability of relatively lower-priced new handovers, there are many options available for first-time buyers to purchase smaller units for themselves.

“Many tenants are actually exploring this option as well and are becoming homeowners.”

The growing role of consultants

As demand grows and negotiations become intensive between tenant and landlord, , both parties are resorting to property consultants to reach an amicable solution.

Sachin Kumar Singh said many tenants are seeking the help of reputable property consultants who can guide them through the rental process, find affordable housing options and negotiate better terms for them.

“Tenants are also hiring agents to mediate rental agreements and protect the interests of both parties involved. This is crucial for ensuring a fair and transparent rental process. Tenants and their agents are conducting thorough due diligence by verifying title deeds and other relevant documents. This ensures that the property is legally sound and that there are no hidden issues that could affect their tenancy,” he said.

Jacob Bramley said there landlords are increasingly preferring property management to handle negotiations. “Engaging a reputable property manager ensures that owners can request potential rent increases properly, providing a sense of assurance to tenants that the process is conducted legally and professionally.”

Usman Sukhera said tenants are often seeking flexible payment options, especially those which allow them to spread their rent over multiple months.

Sukhera added ‘Rent Now, Pay Later’ option, where a third-party platform puts up the rent advances, is also gaining traction.

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