Rents have increased over the past year in most areas of Dubai and rent-free month services are now extinct.
“Rent-free months and grace periods for tenants to move into properties early without paying rent are becoming rare in the Dubai rental market. This is due to the high occupancy rates enjoyed by landlords, thanks to the growing population in the emirate.”
Real estate industry executives, however, say landlords are willing to spread the rent over multiple cheques though this often results in the tenant paying a higher overall rental price.
Rental rates in many parts of Dubai have been escalating at rates exceeding ten percent for several years, driven by increased demand attributed to a growing population. Moreover, during the pandemic year, developers put several projects on hold, resulting in a deceleration of new property availability.
Shortages of houses
The population of the emirate reached 3.65 million in 2023, which is an increase of 100,000 from the previous year. This growth can be attributed to the influx of foreign workers, professionals, and investors in the post-pandemic period.
Alois Kugendran, general manager for real estate at Huspy, shares the sentiment of his industry peers that incentives such as rent-free months are no longer being offered. He explains that the demand for housing has been driven by population growth, which has resulted in a shortage of available homes. This has created a market that heavily favors landlords, making it difficult for tenants to secure a property. He notes that this is a very different scenario compared to 2-3 years ago. Despite higher rental prices and a significant reduction in incentives, occupancy rates continue to rise.
Attracting Long Term Tenants
According to Karun Luthra, Vice-President of Global Operations at Foremen Fiefdom, the combination of high occupancy rates and increasing rental prices in Dubai empowers property owners. As a result, traditional enticements like rent-free periods are becoming rarer, with owners now prioritizing the attraction of long-term renters and highlighting the quality of their properties. Their focus has shifted to the intrinsic value offered by their buildings and the facilities provided, moving away from financial perks.
Luthra noted that a diminishing number of property owners are now providing incentives such as months without rent, reduced number of payment checks, and other benefits, particularly in high-demand areas. The competitiveness in these locales allows landlords to depend more on the inherent attractiveness of their properties and the amenities available to draw in residents, instead of relying on extra incentives. However, he mentioned that in locations where the property supply exceeds demand, landlords might still resort to such incentives to attract occupants.
More cheques but higher prices
Landlords are becoming more flexible, letting renters spread out payments.
“In today’s market, finding the perfect place means competing with others, and many landlords prefer getting paid in one or two large payments. However, some landlords are teaming up with services that pay the rent all at once, and then let tenants pay back monthly. This makes things easier for renters and benefits everyone,” said Alois Kugendran.
Jacob Bramsley noted that landlords are leaning towards getting more money and more payments, boosting their profits.
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