Dubai Rentals flying high in the sky

Published March 26th, 2015 - 11:07 GMT

Even Dh80,000 won’t get you far when it comes to finding a two-bedroom apartment in Dubai. And the way the rental market is behaving, that sum would force a prospective tenant to look to the outer suburbs or even some of the northern emirates.

“It has become extremely challenging for “single-income families” with one or two children” and in certain occupations such as teaching or nursing to come upon an “affordable” two-bedroom apartment in Dubai, according to analysis by ValuStrat Consulting, an advisory firm.

The best that someone in a secretarial position or a nurse can hope to rent is a studio, while an accountant or a school teacher will have to make do with a one-bedroom apartment.

Eating into salaries

The firm based its findings by looking at Dubai’s demographic trends, headline inflation rates, residential stock supply and current rent levels. It also worked the numbers using salary surveys cutting across job categories and commuting distances between the place of work and the residence.

According to the research, on average up to 38 per cent of an individual’s income can be taken up by rentals.

While Dh80,000 would have been enough to rent a 150 square metre two-bed unit with views of the Burj Khalifa, the same privilege would cost Dh180,000, according to Haider Tuaima, Research Manager at ValuStrat.

“There is a substantial demand for family-friendly two- and three-bedroom apartments in Dubai for decades to come, creating opportunities for intuitional investments, REITs [real estate investment trusts], housing associations as well as employers to invest in affordable rental stock.”

On its part, Dubai Municipality has proposed affordable housing quotas for all new residential developments that go on sale.

This is in addition to the allocation of 100 hectares in Muhaisnah Fourth, Al Quoz Third and Al Quoz Fourth to develop rental units for more than 50,000 people earning Dh3,000 to Dh10,000 a month.

“Expanding the infrastructure and developing new townships is expected to take several years… meantime we expect continued substantial demand for investment in affordable and family friendly rental stock,” said Tuaima.

Only government intervention can create the massive housing capacity needed to stanch the spike in Dubai’s rental levels. Rents – and the demands of landlords – have remained obdurate to any sharp correction, even as the sales side of the property market has seen transaction levels go down significantly in the last two quarters.

“We have not seen rents come down… but what has happened is the rental growth has stopped,” said Robin Teh, Country Manager at Chestertons MENA.

“Rentals have remained at same levels over the past quarters. Tenants are also refusing to accept more increases, particularly expats with families who are faced with multiple expenses such as school fees and other government fees.

“At current levels, rentals are being perceived as unaffordable by majority of residents.

“Landlords are more receptive to the idea of accepting multiple cheques, with four being a norm. However, the market is still in transition mode.”

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