Something has gone wrong in Dubai residential real estate

Shutterstock/Alex Vog

I don’t want to move home, but I may have to. My dread at the prospect tells us a lot about the scale of the increases in Dubai residential rents.

For the past four years, I’ve lived in a three-bedroom apartment in the Emaar Towers development in Dubai Marina, and thoroughly enjoyed it.

Most people in Dubai know the “Emaar Six”, as the area is known. It was one of the first residential developments in the Marina, and has proved to be one of the most successful bits of urban infrastructure in town.

Six high rise towers are clustered around communal amenities such as gardens, swimming pools and walkways. It was built to a high standard two decades ago, and has proved popular ever since.

Although rented, my place has felt like home ever since we moved in. With my wife, daughter and small dog, we sat out the pandemic here, and were grateful for the dog-walking facilities that got us out of the house, legally and hygienically. We like it here.

What happened to upset our lives will come as no surprise to anybody living in Dubai over the past 18 months. Our apartment was sold by its previous owner, an investment company based in Hong Kong, to a new landlord, who promptly gave us notice to quit.

Did he want to move into the apartment himself, or did he want to sell it on? I can’t remember the details exactly now. The matter is grinding through an official arbitration and will be determined soon enough.

So, planning for a move while hoping to avoid one, or at least stay in the same area, we began to look around, and found – joy of joys – the exact same apartment a few floors higher up in my tower.

The removal process if it comes to it will, as usual, be a trial, but will only involve some heavy lifting within the tower block, rather than via the nightmare prospect of road transport. Why, we won’t even need new curtains.

• Three Dubai luxury hotels join Marriott portfolio
• Dubai unveils $56bn plan to improve standard of living
• Dubai kindergarten sector shows strong potential

Then came the blow. The “new” apartment (in fact, exactly the same apartment in size and design) costs nearly double my current rent. I calculated it as a 93 percent rise.

This is a sign of the times. It seems unfair that the laws of economics, or demand and supply, or market forces, justify such an increase in the space of an annual tenancy contract. But they do.

Dubai has taken significant steps to limit property speculation, by imposing a 20 percent minimum deposit on property purchases. The market has been through significant ups and downs before, notably in the wake of the 2009 financial crisis, and, more recently, in the pandemic. 

And yes, analysts are predicting a slowdown in rent increases this year as more supply comes onstream. 

But by commendably seeking to control rent increases for existing tenants, the authorities are indirectly encouraging price gouging, inflation and dislocation across the board for new tenants. Legal disputes between tenants and landlords have soared across the emirate. 

My 93 percent rise is the most egregious increase I have yet come across. The expert consensus is that new rents were more than 30 percent higher in 2023, with a further 20 percent forecast for this year.

Even that level, added together a more than 50 percent increase in two years, is unmanageable by any normal standards. Something has gone seriously wrong.

Dubai’s handling of the pandemic was exemplary, and its economic recovery since then has been a textbook case of economic management. 

But it seems to me that the planners and policymakers are in danger of losing sight of what makes Dubai attractive in the first place: value for money and quality of life.

The emirate has just revealed a multi-billion-dollar 10-year plan to make it one of the top three most attractive cities in the world by standard of living. That may be challenging.

People come to the emirate to live and work because they are assured of a decent standard of living, without the burden of income tax, of course, in an environment where they can choose how to spend their cash.

In short, they are expatriates who expected to see out their careers, and beyond, in the UAE.

How can this fit in with the rest of the Dubai strategy? The emirate is looking to double its population to around 6 million by 2040. That will require careful and strategic planning, as detailed in the latest Urban Master Plan.

That project is in jeopardy in the hyper-inflationary chaos currently being endured in residential real estate, where stability is an essential ingredient of a balanced property market.

Meanwhile, I’ll get to measuring the curtains.

Frank Kane is Editor-at-Large of AGBI and an award-winning business journalist. He also acts as a consultant to the Ministry of Energy of Saudi Arabia