Rents for apartments in The Greens community on Sheikh Zayed Road surged by over 40 per cent in past 12 months, the highest increase among master communities in Dubai, says a new report.
CBRE, a global property consultancy, in its Q1 Dubai real estate report, said on average rents for two bed units in established residential locations such as Dubai Marina, Palm Jumeirah and Downtown Dubai rose 27 per cent year-on-year.
Emirates 24|7 reported in March that rentals of apartments in The Greens rose the highest, outperforming Dubai Marina and Downtown Dubai, based on the rent index of Dubai’s Real Estate Regulatory Agency.
The index had revealed that the cost of renting a studio, one- and two-bed apartment in The Greens, a community developed and managed by Emaar Properties, jumped by 22 per cent, 15 per cent and 28 per cent, respectively.
Matthew Green, Head of Research and Consultancy, UAE, CBRE, said in the report: “Dubai’s established residential locations remain incredibly popular amongst the emirate’s expatriate workforce, with rents and occupancy rates continuing to grow at a rapid rate amidst strong investor and occupier demand.”
Raising a concern over the recent hikes in prices and leasing rates, he said: “The residential sector has maintained positive momentum amidst solid market fundamentals and steady economic growth. However, there is a modicum of concern that the recent escalation of sales and leasing rates could actually be a little ahead of reality.”
The disconnect, Green pointed out, during the past 18 months has been the substantial return of foreign investment and speculator/investor activity — a trend mostly evident at recent off-plan sales launches.
Dubai Marina, Emirates Living, Palm Jumeirah and Downtown Dubai continue to dominate activity in the sales market, with 60 per cent of all transactions in volume terms.
Villa properties continue to see solid upward movement in both rents and sales pricing, with five consecutive quarters of growth now recorded, CBRE said.
Average villa rents jumped by nearly five per cent in the quarter with smaller unit (two and three bed) registered substantially higher growth of nine per cent and seven per cent, respectively.
The upscale Springs community maintained its exceptional performance, registering growth of over 25 per cent year-on-year. Rental rates for a three bedroom villas currently average Dh165,000 per year compared to Dh125,000 pa at the same period last year, registering an increase of 32 per cent.
Though maintaining an optimistic view of growth of residential sector, Green said: ”… the current rate of growth will have to be monitored quite closely and with a certain degree of caution, with some residents already starting to feel the pinch of the rising cost of living.
“This is a factor that if not mitigated through new supply and further regulation and intervention, could eventually impact upon Dubai’s competitiveness as a burgeoning global business environment.”
In order to control rent hikes, Dubai has already issued Decree No. 2 of 2011. Article (1) states:
The maximum rent increase percentage of property units in Dubai leased before the enforcement of this Decree shall be as follows:
A - There should not be any rent increase, if the rent for the real estate unit is up to 25% below the average similar rent.
B - If the rent value was 26% to 35% less than the average similar rent; the maximum rent increase shall be equal to 5% of such value.
C -If the rent value was 36% to 45% less than the average similar rent; the maximum rent increase shall be equal to 10% of such value.
D - If the rent value was 46% to 55% less than the average similar rent; the maximum rent increase shall be equal to 15% of such value.
E - If the rent value was less than 55% of the average similar rent; the maximum rent increase shall be equal to 20% of such value.
For the purpose of this Decree the similar rent value of the property unit means pursuant to “The Rent Index of the Emirate of Dubai” approved by RERA.
This Decree shall be enforced from the date of its issuance and shall be published in the Gazette.
Although Dubai Land Department has said that a landlord must give a 90-day notice to the tenant if he plans to increase the rent. But despite the rent control regulations in place, landlords have been increasing rents arbitrarily and not adhering to the Rera rent index.