Dubai tenants face difficult rent decisions as property market thrives

As the economy recovers from the onset of the pandemic and Dubai property prices recover, tenants say they face sizeable rises in rent.

In some of the most popular areas of the emirate, rent has increased by up to 20 per cent after prices dipped during the pandemic.

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

She paid Dh42,000 a year for the two-bedroom property, and said this was a good deal at the time, despite months of maintenance glitches including problems with the air conditioning and plumbing.

The agency sent me an email and stated that according to the Rera calculator they could increase the rent by 20 per cent as the property was already rented out at 40 per cent less than market value

Hoda Ayache,
Dubai resident

In July, three months before her contract was up for renewal, she was told the rent would rise to Dh50,400 a year.

“The agency sent me an email and stated that according to the Real Estate Regulatory Authority (Rera) calculator, they could increase the rent by 20 per cent as the property was already rented out at 40 per cent less than market value,” she told The National.

Hoda Ayache moved out of her apartment in Sports City as the rent increase was too high. Khushnum Bhandari / The National

“I wouldn’t have minded so much, but the apartment was in such bad condition. For the whole time I was living there, the air conditioning did not work correctly and I had continuous leaks in the bathroom ceiling.

“Despite several visits from the maintenance team, the landlord or agency didn’t fix the issues, so when I got that email about the rent increase I was shocked.”

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

Lucas Charles, a public relations executive from New Zealand, said he faced a yearly increase of Dh6,000 on his two-bedroom property in The Greens two months ago. He had been paying Dh56,000 per year for two years prior to the rent increase alert.

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

“To get slapped with a considerable rent hike is stressful. I didn’t want to move from the property as I love the area, so I tried to negotiate a fair deal.

“After several unanswered emails, I eventually managed to speak to someone but had no luck trying to lower the increase. I ended up just agreeing to the new contract.”

He now pays Dh62,000 a year for his apartment.

Estate agents say property market is booming

Estate agents working across the city said the rental market has not been this busy in years. Clients are eager to snap up townhouses and villas – particularly 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 working week between the office and home.

Mario Volpi, sales and leasing manager for Engel & Voelkers, said landlords can legally raise the rent by up to a fifth, regardless of whether they are charging below market price.

“The most he or she can raise it by in any one year is 20 per cent, but it has to be in line with what the Rera calculator states,” he said.

“The likelihood is, if a tenant is now being charged 20 per cent more from one year to the next, they must have been paying well below market value to begin with.

“When someone moves into a property, a tenancy agreement is written. In that, it states that if a tenant or landlord wish to make changes to a contract, be it the rent or number of cheques given, this has to be communicated three months before the year is up,” Mr Volpi said.

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

How Dubai’s rent calculator works

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

For instance, if the current annual rent is below 10 per cent of the market value, no increase is allowed. But if the rent is between 11 per cent and 20 per cent under the market, a maximum rise of 5 per cent is permitted. This progresses to a maximum of 20 per cent.

Mr Volpi said coming to a fair agreement on rent is all about negotiating and “establishing good landlord-tenant relationships”. But ultimately, if the landlord does not agree to the tenant’s revised price, the tenant has to vacate.

While tenants may feel hard done by in this case, Mr Volpi said the current property laws often tend to “favour and protect the tenant”, as the government does not want to be seen allowing landlords to push tenants out unfairly.

“When the market is going up, as it is now, the landlord has to abide by the Rera calculator not the market price,” he said.

“But when prices go down, the rent calculator goes out of the window and the tenant relies with the market forces and, as such, has way more bargaining power.”

Naseer Alam, founder and chief executive of Expert Properties in Dubai, said demand for residential property was rising.

“This is majorly because of people visiting the UAE for Expo 2020 Dubai,” he said.

“It has led to a substantial rise in the properties, be it short or long-term, particularly studio apartments preferred by executives or villas opted for by families. As per our records, this rise in price is greater than anything that has been in the past three years.

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

How properties in Dubai go in minutes

Estate agent Charlie Shetliffe is arranging up to six viewings a day for potential tenants. Issa AlKindy for The National
Prospective tenants view a property in Dubai's Jumeirah Golf Estates. Issa AlKindy for The National
Dubai Marina remains the most popular destination in the emirate for those seeking luxury apartments, according to a report. AFP
Jumeirah Village Circle is the most searched for area by those looking for budget-friendly apartments in Dubai, the report revealed. Chris Whiteoak / The National
There is currently a lot of demand for villa communities in Dubai, according to estate agents. Issa AlKindy for The National
Villas and town houses are being snapped up almost immediately in the emirate. Issa AlKindy for The National
Potential tenants measure a property in Jumeirah Golf Estates. Issa AlKindy for The National

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3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks.

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.

7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Dubai tenants face difficult rent decisions as property market thrives

Agents say recovery from Covid-19 means the rental market has not been as busy in years

Estate agents say property market is booming

How Dubai’s rent calculator works

How properties in Dubai go in minutes

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Ten tax points to be aware of in 2026

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UAE Falcons

Dubai tenants face difficult rent decisions as property market thrives

Agents say recovery from Covid-19 means the rental market has not been as busy in years

Estate agents say property market is booming

How Dubai’s rent calculator works

How properties in Dubai go in minutes

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