Residential Rents in Dubai to Stay Lower in 2020

Despite the rise in economic activities and the preparations for Expo 2020 going in full swing, experts assure UAE residents of lower rents in the year 2020.

Contrary to earlier speculations that rents will be hiked ahead of Expo 2020, experts say that rents will stay low. This would be the result of new units increasing the market competition; a restrained population growth, demand-supply correction and economic uncertainties.

Compared to 9.1 percent drop in 2017 and 8.4 percent in 2018, the latest statistics indicate a drop in the average annual rent in the first quarter of 2019 by 9.2 percent. Apartments in Dubai recorded a 9.4 percent drop in rents, while villa rates registered a drop by 8.8 percent. 

In the last three years, average rents in Dubai have experienced approximately 27 percent decline and the trend is expected to continue in 2020. Areas with major new supply pipelines are expected to experience even more substantial drops in rents.

A report covering average apartment rents showed a drop in rents from Dh74,373 in the first quarter of 2019 to Dh70,548 in the third. Villas in Dubai are also shown to have a similar decline with rates falling from Dh221,202 in the first quarter of the year to Dh210,454 in the third.

One-bedroom apartments were rented at approximately Dh67,000 annually; two- and three-bedroom apartments were at Dh97,000 and Dh130,000, respectively. Two-bedroom villas were at Dh105,000; while three- and four-bedrooms were Dh160,000 and Dh209,000 respectively.

Studio apartments were typically rented at Dh48,000 annually while residential occupancy in Dubai is now estimated at 86 percent.

Experts have attributed the decline to a market demand and supply mismatch. There are also indications for the rise in rents from the first quarter of 2020. The change may occur as a result of the likely pressure on the residential rental market in 2020. 

Notwithstanding, changes in the property laws and regulations, infrastructural improvements, as well as Expo 2020,  will positively impact the economy generally and by implication, the real estate industry.

The downward trend in rents has been attributed to subdued population growth, market demand-supply mismatch, limited business growth, and regional and global economic instability.

Many tenants, in a bid to avoid the stress of moving, make poor bargains with landlords. However, it has been said that the declining rent would be optimized by tenants depending on their negotiation power and their readiness to move if the landlord is not flexible.

According to the recent report, Dubai Sports City, Discovery Gardens, Jumeirah Lake Towers, Dubai Marina and Dubai Production City are the places that experienced the most significant drops in the first three quarters of 2019. Arabian Ranches, Jumeirah Village, Jumeirah Islands, Dubai Silicon Oasis and Jumeirah Golf Estates were the communities with the weightier drops, with rents declining from 13.7 percent to 7.1 percent during the period of January 2019 to September, 2019.