How Rental Rates For Real Estate In Dubai Have Changed Amid The Pandemic?
It is not a secret now the pandemic has covered all countries around the world and has had a great impact on the global economy. Thus, it is only a question of the degree to which each exact country and each exact market were affected. Moreover, it is a question of how long they will recover and, in particular, what the next year may look like.
In this post, we will review rental changes in Dubai rental market that have happened during the pandemic:
- Rental price trends;
- Changes in rent payment conditions,
- New practices regarding early lease termination.
Moreover, you will find here our expert opinion on the year 2021 and shifts it promises to bring for the rental market.
Which areas of Dubai have had significant rental changes?
Well, depends. First, it depends on what property type to consider. Second, it depends on what unit to consider within the group.
So, let’s start with apartment rental changes. Here, looking ahead, all types of unit faced rent declines. But let’s be specific to discover areas where the declines were the most significant:
1. Studios. Indeed, here, we can see the most drastic decline with Jumeirah Lake Towers as a no one leader and Downtown as the best survivor:
- Jumeirah Lake Towers: – 22.2%;
- Palm Jumeirah: – 19.1%;
- Jumeirah Beach Residence: – 13.4%
- Dubai Marina: – 10%;
- Jumeirah Village Circle: – 8.6%;
- Downtown: – 7.7 %.
2. 1-bedroom apartments. Here, the drop is less drastic. However, Jumeirah Lake Towers are still first in losing their prices, although now the Sir Stability is Jumeirah Beach Residence:
- Jumeirah Lake Towers: – 15%;
- Jumeirah Village Circle: – 13%;
- Downtown: – 12.2 %;
- Dubai Marina: – 10%;
- Palm Jumeirah: – 7.9%;
- Jumeirah Beach Residence: – 0%.
3. 2-bedroom apartments. Here, the biggest drop took place in Dubai Marina, closely followed by Downtown. In contrast, Jumeirah Village Circle rental decline was trice less for this property type:
4. 3-bedroom apartments. Here, it was Downtown that lost its fight for rent retention. And, it seemed, Jumeirah Beach Residence and Palm Jumeirah were his closest comrades. On the contrary, Jumeirah Village Circle showed itself almost at its best, having price loses fourfold lower:
- Downtown: – 21.3 %;
- Jumeirah Beach Residence: – 18.6%
- Palm Jumeirah: – 17.5%;
- Dubai Marina: – 15.2%;
- Jumeirah Lake Towers: – 11.1%;
- Jumeirah Village Circle: – 5.3%.
To sum up, it seems the pandemic has strongly hit Downtown in every point except the studio.
At last, let’s move to villas. In contrast to apartments, villas were more demanded these nine months.
During the total lockdown, when people were forbidden to leave their dwellings, villas became the “life raft” due to the greater moving freedom they offered. And even after the end of lockdown, people tend to target larger spaces around themselves and their families. And a villa is the exact place that can offer that space.
As a result, in most cases, villa rental prices not only did not decline significantly but even increased:
- Jumeirah Village Circle: – 2.8%;
- Dubai Marina: – +1.6%;
- Downtown: – +12.8 %;
- Palm Jumeirah: + 12 for 5-bed villas (though 3-4 bed villas showed +10% but only during the April-May period);
More flexibility on cheques and break clauses
Before the pandemic, a 1-year rent cheque was the common payment condition. Of course, you might meet a 6-month rent cheque payment, but it was on rare occasions. Now, as many tenants have to face financial difficulties because of a wage decrease, unpaid leaves, or even job loss, these payment conditions became too burdensome for them.
Therefore, landlords started to apply more flexible rent payment schemes. The main goal here is one of the following reasons:
- Help their existing tenants survive the difficulties;
- Retain their existing tenants and prevent them from moving out of the unit;
- Compete on the market more successfully, attract a new tenant, and lease the property quicker if it is still vacant.
So, nowadays, four, six, and even twelve cheques are an ordinary thing. Respectively, the rent is charged every quarter (every three months), every two months, and even every month. Undoubtedly, this flexibility provides a nice room for tenants to occupy the place even in times of financial hardship. To clarify, now they can enjoy installments, paying a few smaller cheques during a year instead of paying a lump sum at once.
Moreover, tenants can enjoy more flexibility on break clauses now. To clarify, previously, they had to pay a penalty for early lease termination. Typically, it was about two-month rent to pay. However, now many landlords are willing to neglect this common practice. Thus, cases, when free early lease termination is included in the rental agreement, are not unheard of.
What is the outlook for 2021?
The forecast for Dubai real estate market as a whole and its rental market, in particular, is very positive for 2021. That is to say, experts expect market recovery at the end of 2021. At least, there are three reasons that assure this bright future.
First of all, partially, the recovery is related to the fact that new construction has slowed down its pace. To clarify, some (if not many) developers revised their launch plans and confirmed there would be little new-built units to compete. Therefore, the supply will slow down, prices are going to stabilize.
Second, when Covid-19 ceases its grasp and the whole Dubai economy starts recovering (and, fortunately, we are already facing this, though, sinuously yet), we expect an influx of expats who are seeking jobs. This will create a good increase in demand, at least on the rental market, and push the rental prices forward.
At last (but not at least), EXPO 2020 is coming next fall. Undoubtedly, the event will facilitate and accelerate market growth. To clarify, this will happen much earlier than EXPO 2020 officially starts, and its cumulative effect will last much longer than EXPO 2020 in itself.
Yes, now is a good time to get into the rental business or expand it with a few new units. The property prices are low, so you can easily find your best buy. Besides, at BSO, we always ready to assist you in purchasing and managing your property. Get in touch with us to learn more.