Landlords keep upper hand in Dubai rental market

• One-cheque payments dominate
• Rental yields better than LA
• Supply still not meeting demand

Landlords have the upper hand in Dubai’s rental market, real estate experts say, as single-cheque payments for annual leases continue to dominate in the emirate.

“With a limited number of properties available and an influx of new tenants, landlords find themselves in a stronger negotiating position,” Lewis Allsopp, chairman of the Dubai estate agent Allsopp & Allsopp, told AGBI.

The emirate’s population increased by more than 100,000 last year, reaching 3.65 million on December 17, according to government statistics.

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Dubai’s 2040 urban masterplan projects that the emirate’s population will be 5.8 million by the end of the next decade.

The pressure to find rental accommodation has led to a number of landlords looking for a one-cheque payment to cover the entire year’s rent.

Allsopp said in November that almost a third of landlords on the company’s books were asking for a one-year payment.

The average annual rent for a villa/townhouse in Dubai was more than AED281,000 ($76,500), while apartments were commanding average prices of AED133,500, the agency said.

George Barker, senior sales agent at Betterhomes in Dubai, said four-cheque payments had been prevalent throughout 2020 and 2021 – but this changed in 2022 with single cheques “becoming the norm”.

The total number of Ejari entries, which record the registration or renewal of a tenancy contract in the emirate of Dubai, rose 8 percent in 2023 to almost 577,000. New registrations dropped 12.2 percent, while renewals were up 23.6 percent, indicating that tenants were staying put to avoid costly new leases.

Taimur Khan, head of Middle East research at CBRE Middle East, said: “This is unsurprising given the strong rate of rental growth that we have seen over the course of 2023.”

Khan said the market was “very much landlord-favoured” in 2023.

Annual rental yields in Dubai have increased to more than 11.3 percent, placing the emirate ahead of New York (5.33 percent), Los Angeles (6.38 percent) and London (3.51 percent), according to real estate management company AirDxb.

Only 24,000 units are set for delivery in 2024, half the number completed last year, with the majority in affordable areas such as JVC, Arjan, Dubai Production City and Dubailand.

Abdullah Alajaji, founder of Driven Properties in Business Bay, Dubai, said: “This will likely add pressure to rental prices in affordable areas and somewhat stabilise the mid-market as rents become less sticky.”

However, he added: “In the upper segment of the market, with supply still not meeting the demand equilibrium, we will likely see rents stick and prices swing upwards.”

Although a circular issued by Dubai Land Department last year said tenants could make their rental payments automatically by direct debit, the cheque system remains as strong as ever.

Callum Radford, sales manager, residential brokerage at Colliers Mena, said more flexible options were now being offered. This includes “rent now, pay later” services, where tenants pay monthly but landlords are provided with the full-year rent up front.