Rents in Dubai decreased by 21% in the third quarter of 2020, as the income contraction is driving a major movement in the rental market.
Property consultants say that as a result of the heavy mobility of tenants, landlords have been more flexible, forced to negotiate lower rents and flexible lease terms when renewing tenants to retain them.
“This prompted many tenants to stay at their current location as they were able to achieve rental savings after negotiations while avoiding uncertainties and additional moving costs,” said Parathiusha Ghorabo, Head of Research and Advice at the Heart Center.
Rents in Dubai Sports City decreased by 20 percent in the third quarter, the highest, followed by Dubailand (18% ), Greens & Views (15% ), and Jumeirah Lake Towers (14%). Among the villas, the most year-on-year decreases are witnessed in year-on-year in Reem-Mira and Villa in Duplond (21%) followed by the springs and meadows (13%) and the Jumeirah Village Circle (12%).
However, depending on the resilience of the property owner and the financial capacity of the tenants, many of them have moved elsewhere to achieve substantial savings, with rents dropping significantly over the past 12 to 24 months, with a particularly sharp decline over the past few months. Tenants are now able to find a newer structure and sometimes even find larger units with similar or lesser returns than they were paying before.
“With household incomes expected to continue to fall under pressure, we expect resettlement operations to continue, with the majority of tenants remaining price sensitive,” Gorrabeau said.
They added that some tenants, on the other hand, have moved to overseas locations that have seen the handover of new shares such as the Jumeirah Village Circle, Dubai Sports City, and projects in Doubleland for significant savings while tenants are looking to manage financing against the backdrop of widespread salary cuts.
However, Allsopp & Allsopp said travel restrictions and Covid-19 are having an effect on admissions.
“As for the former tenants already residing in Dubai, many of them negotiated rent reductions, while others decided to buy their first home due to the increase in the loan to value. On the other hand, some tenants moved to larger properties that were driven by the lack of space on their current properties during the insurance period. Louis Allsope, CEO of Allsopp and Allsopp, said.
In recent months, Allsop said, quite a few previous car manufacturers have moved to Dubai, so the decrease in rental transactions has become evident.
He added, “I think this will change as we enter the fourth quarter of the year, and maybe more, as we enter the year 2021 as job losses all over the world affect the emirate and may encourage more people to pursue different job opportunities.”