Tenants call the shots as Dubai landlords offer 3 year rent freeze

Dubai's general decline in demand of property is now casting its shadow on the residential rental market with a majority of Dubai landlords now being forced to lure tenants with new incentives to rent their property.

The latest in this trend is the offer for a three year freeze on any increase in rents among other sops designed to stimulate a rapidly slowing property market according to realty consultants in this desert emirate.

According to leading industry experts, these agreements and incentives do not violate any of the existing rules set by the Dubai Land and Property Department.

Other incentives on offer include: a free month's rent, more payment installments for the property and free water and electricity in the first month.

As per some media reports, a few landlords are going a step further and offering totally new incentives that have not been offered in the real estate sector before. A list that includes: free internet services for tenants and free access to the gym, swimming pool and other facilities.

Some realty consultants have attributed these never-seen-before sops and incentives by landlords and property companies as a means to try and attract new clients while simultaneously retaining existing ones with whom  they already share a warm rapport.

Some of the 'extra' incentives being offered to old / existing customers include better maintenance services and an increase in rent installments to six or eight from four.

Leading Dubai-based realty consultants like Yousef Ali Hyder are optimistic that these innovative marketing techniques and incentives will provide a fresh momentum to the city's subdued realty market.

"Tenants can now state their terms and negotiate customized deals with landlords who have no choice but to accede to their demands in the interest of keeping their property units fully occupied," opines Hyder.

The Dubai property market has in recent times been inundated by new supply which has resulted in an oversupply situation and put pressure on property prices and rental values.

Others have described this trend as a 'correction period' for Dubai's property market which until last year was scaling new heights in terms of growth backed by a solid demand.

As per a report by the Abu Dhabi Islamic Bank (ADIB) rents in Dubai dropped three per cent on supply of new units in the second quarter of this year, while real estate consultancy Asteco said in its Q2 2015 report that apartment and villa rents across Dubai fell by an average 2 per cent in 2015.

A majority of the new 6,750 residential units came up along the Sheikh Mohammed bin Zayed Road (MBZR) with International Media Production Zone (IMPZ) area accounting for 26 per cent of the total supply. The new supply of 6,750 units took the total number of residential units in Dubai to 479,000 by the end of the second quarter of this year.

According to the ADIB report, the biggest fall was in Business Bay property prices, which recorded a five percent fall in value. Capital values for completed apartment units fell 3.5 per cent quarter-on-quarter.

As per inputs from CBRE, Rentals within the villa market saw the steepest decline, falling by an average of three per cent as compared to a two per cent dip in apartment rentals.

In its report titled 'Top Trends For UAE Real Estate' released earlier this year, JLL had stated that residential prices in Dubai are expected to see either flat growth or decline by up to 10 per cent this year.

The rental segment in the emirate mirrors the sales market, and some areas are similarly expected to witness a drop in rents of up to 10 per cent, confirmed Craig Plumb, director Research at JLL MENA. According to Plumb, for new tenants moving in, landlords are likely to maintain the rents at existing levels or even reduce them further in extreme cases.

For those already renting properties, their landlords are unlikely to offer a rental decrease, but they would probably start to offer additional things like maybe one month rent free, or better maintenance or new appliances among other things, he added.
 
Currently, rental rates in Dubai are based on a rental index moderated by Dubai's Real Estate Regulatory Authority (RERA) along with the Land Department.