Dubai tenants face tough rental decisions as real estate market booms

As the economy recovers from the onset of the pandemic and property prices in Dubai recover, tenants say they are facing significant rent increases.

In some of the emirate’s most popular areas, rents have risen by up to 20% after prices plummeted during the pandemic.

In October last year, Lebanese resident Hoda Ayache, 52, rented a spacious apartment in Dubai Sports City through a real estate agency so she could work more comfortably from home.

She paid Dh42,000 a year for the two-bedroom property and said it was a bargain at the time, despite months of maintenance issues including air conditioning and plumbing issues.

The agency emailed me and said that according to the Rera calculator they could increase the rent by 20% because the property was already rented at 40% below market value.

Dubai resident Hoda Ayache

In July, three months before the renewal of his contract, he was told that the rent would increase to 50,400 Dh per year.

“The agency sent me an email and said that according to the Real Estate Regulatory Authority (Rera) calculator they could increase the rent by 20% because the property was already 40% let less than market value,” she said. The National.

“It wouldn’t have bothered me so much, but the apartment was in such poor condition. The whole time I lived there the air conditioning didn’t work properly and I had continuous leaks from the bathroom ceiling.

“Despite several visits from the maintenance team, the landlord or agency has not resolved the issues, so when I received this email about the rent increase, I was shocked.”

After months of back and forth, trying to negotiate the price, Ms Ayache decided to leave the apartment when her contract expired.

Lucas Charles, a public relations officer from New Zealand, said he faced a Dh6,000 annual raise on his two-bedroom property in the Greens two months ago. He had been paying 56,000 Dh per year for two years before the rent increase alert.

“I know the rental market has rebounded from the Covid-19 pandemic, which is good for landlords, but some people are still facing pay cuts at work,” he said.

“Getting slapped by a huge rent hike is stressful. I didn’t want to leave the property as I love the area so I tried to negotiate a fair deal.

“After several unanswered emails, I finally managed to speak to someone, but I had no luck trying to reduce the raise. I ended up accepting the new contract.

He now pays 62,000 Dh per year for his apartment.

Real estate agents say the real estate market is booming

Estate agents working across the city said the rental market hadn’t been this busy in years. Customers are eager to grab townhouses and villas – especially in the city’s desert suburbs – as quickly as possible. The legacy of remote working is a major factor, with many professionals now splitting their workweek between the office and home.

Mario Volpi, head of sales and rentals at Engel & Voelkers, said landlords can legally raise rent by up to a fifth whether or not they charge below market price.

“The maximum he or she can increase per year is 20%, but that has to be in line with what the Rera calculator says,” he said.

“It is likely that if a tenant is now being charged 20% more year-over-year, they must have paid well below market value to begin with.

“When someone moves into a property, a rental agreement is drawn up. In this, it states that if a tenant or a landlord wishes to make changes to a contract, whether it is the rent or the number of checks given, this must be communicated three months before the end of the year, ”said Mr. Volpy.

“If the landlord has communicated a rent increase within the 90-day period, in writing, and it complies with the Rera calculator, if the tenant does not agree, their only other choice is to vacate the property. .”

How the Dubai Rent Calculator Works

Rera was created in 2013 to regulate the market and prevent it from overheating. Its rent calculator shows whether or not an increase is applicable and uses criteria such as location, type of property, current rent and number of bedrooms. It works by comparing properties with similar properties nearby.

For example, if the current annual rent is less than 10% of market value, no increase is allowed. But if the rent is between 11 and 20% below the market, a maximum increase of 5% is allowed. This progresses to a maximum of 20 percent.

Mr Volpi said reaching a fair rent deal was all about negotiating and “establishing a good landlord-tenant relationship”. But ultimately, if the landlord disagrees with the tenant’s revised price, the tenant must vacate.

While tenants may feel aggrieved in this case, Volpi said current property laws often tend to “favor and protect the tenant” because the government doesn’t want to be seen allowing landlords to evict unfairly. the tenants.

“When the market goes up, as it is now, the owner must comply with the Rera calculator and not the market price,” he said.

“But when prices go down, the rent calculator disappears and the tenant relies on market forces and as such has a lot more bargaining power.”

Naseer Alam, founder and managing director of Expert Properties in Dubai, said demand for residential properties was increasing.

“It’s mainly because of people visiting the UAE for Expo 2020 Dubai,” he said.

“It has led to a substantial increase in the housing stock, whether short or long term, in particular studios favored by executives or villas chosen by families. According to our records, this price increase is greater than anything in the past three years.

“Some of the most prominent areas where these properties have seen an increase in demand and rents are Dubai Marina, Al Wasl, Jumeirah, The Palm and Dubai Silicon Oasis.”

Updated: November 10, 2021, 9:24 a.m.

About Tammy N. McFarlane

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