The rental market in Dubai has overall reflected a marginal softening in rates. There has been growth in rents of new offerings and declines in projects with inventory overhang. New units are entering the market, however several freehold developers are carefully managing their pipeline with projections for delivery in 2017-18, and adopting a wait-and-watch attitude for this year.
With less new supply entering, the rental market trends are dictated by demand from end-users who seek specific conveniences including connectivity, ease of access to lifestyle and leisure attractions, and a preference to be part of established communities.
Over the past year, the rental markets in Dubai have held steady in most established communities including Downtown Dubai, The Greens and Dubai Marina, principally, for this reason. Areas such as Downtown Dubai continue to command a premium and fetch apartment owners a steady income stream.
This is not a success by default: Over the years, the developers of these communities have invested significantly in development of all-round infrastructure. Accessibility and improved public transport options, parks and community centres, health and fitness facilities, provision of secure communities, hassle-free maintenance and after-care, with the addition of an array of leisure and F&B options have built strong economic value for these neighbourhoods.
The sense of community that these freehold neighbourhoods have fostered has made them the first choice for the discerning professionals. And with the preparations for the Expo 2020 Dubai ongoing, and almost all mega-developments continuing to progress in a 'business as usual' environment, the number of professionals arriving to Dubai is increasing. This, in turn, continues to drive real demand for rental homes in premium locations.
Most residents do not prefer to shift from such thriving neighbourhoods to other locations outside the heart of the city for many reasons. The commissions and security deposit demanded and charges involved in the move would mean that any gain they could accrue would be marginalised. And they also would have to compromise on their lifestyle. This also underlines the maturity of the Dubai property market. Today, there is increasing demand for end-use homes, as people seek to shift from a rental model to an owned-home lifestyle. Across the market, we see a shift in sentiment, with more customers asking, 'when should we buy?' as against 'when should we sell?' Several affordable communities have been launched to meet the appetite for value housing but these are yet to be handed over.
For these customers, the deal is unbeatable. For the rent they pay now, which is lost as 'dead investment,' they have the opportunity to make a long-term own investment in Dubai's property sector, protect their capital and benefit from future capital gains. The challenge before many middle income professionals now is the amount of money they can set aside for investing in affordable homes, while also taking care of the current rent burden. With careful financial planning, this can be addressed - as we see from our interaction with customers, several of them in the Dh15,000 to Dh20,000 monthly income bracket.
Locations such as Karama, Bur Dubai, Al Qusais and pockets of Deira continue to be preferred residential destinations for the expatriate community. The community living fostered by these locations also means that residents have all their retail and F&B choices in close proximity. The Rera rent index continues to serve as the indicator for rental values. Most of these traditional neighbourhoods have clocked an increase in rental values, reflecting the market trends recorded by Rera due to sustained demand and new quality projects being released in these areas demanding higher prices. Across these locations, however, new rental units are entering the supply pipeline. They address any possibility for rental drop by providing extra-value offers to customers such as lower deposits, cuts in commission and even the option of paying yearly rents in multiple cheques.