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| Dubai Rental Market: Landlords Opt for Upfront One-Cheque Payments as Demand Outpaces Supply |
Dubai, United Arab Emirates - Landlords in Dubai are increasingly demanding one-cheque payments from tenants, as demand for rental properties outpaces availability in many areas. This shift away from multiple cheque payments, which were once common, even reaching up to 12 cheques in some cases, is being driven by landlords' desire to receive all payments upfront.
According to Richard Waind, Group Managing Director at Betterhomes, a property services firm, "We saw a 6 per cent increase in tenants paying with one cheque during 2022 and a 4 per cent fall in four cheque payments.” This trend is being echoed by other property companies in the city, with many reporting that landlords are increasingly demanding one-cheque payments.
This shift can put tenants at a disadvantage, particularly those who are new to Dubai and may not have the financial means to pay their annual rent in one lump sum. However, landlords are taking advantage of the high demand for rental properties in the city, which has been driven by a lack of supply and rising rents.
Throughout 2022, landlords found themselves in a position of strength, with rent increases in popular locations reaching 20% or more. Even in areas where new homes were being handed over in significant numbers, most of these properties were pre-let at higher than average rentals.
According to Waind, "We witnessed a rise in rents of 36 per cent on average last year. The lack of supply - for villas in particular - is acute, and we saw villa rents rise at the fastest rate. It should be remembered that rents have been rising rapidly, but from relatively low levels pre and during the pandemic. On average, rents remain lower than previous peaks.”
Industry experts predict that 2023 will see more rent gains across the board, with emerging locations likely to see increases of 15-25%. Additionally, it will be at least two years before today's off-plan projects reach a point of handover in significant numbers, further exacerbating the shortage of rental properties.
Data from Betterhomes shows that by November of 2022, there were fewer rental listings showing up in Dubai, adding to the pressure on rents. The number of listings handled by the firm last year was 24% down on 2021.
The average annual rent for a two-bedroom apartment in Business Bay is Dh105,526, up 22% from the previous year. In nearby Downtown Dubai, the average rent for a two-bedroom unit is Dh125,814, 21% higher than in 2021. However, JLT still offers two-bedroom units at under Dh100,000, with an average rent of Dh91,948, an increase of 22%. Dubai Creek Harbour has seen the most intense rent increase, with the average rent for a two-bedroom unit at Dh104,808.
It remains to be seen if the pace of year-on-year rent increases will slow down in 2023, but experts predict that any slowing will be minimal. The high demand for rental properties and the shortage of available units is likely to continue to put pressure on rents in the city.