GoldCoast Uae

Here is how RERA’s new rent index changed Dubai property dynamics

The Dubai real estate market has been exceptionally active in 2024, despite facing several challenges. The first six months of the year have been particularly transformative, not only for the market but for the entire real estate industry. Key updates to government processes, more stringent regulations, and unusual weather patterns have reshaped residents’ perceptions of Dubai.

Despite these changes, the market has seen significant growth. Rental values have increased by 20% year-on-year, and prices are 10% higher than the previous market peak, reflecting growing confidence among tenants and landlords alike.

RERA Index Ends ‘Covid Pricing’

For the past three years, Dubai’s rental prices have been on the rise, but  Rent Calculator had been based on ‘Covid prices‘, allowing tenants to renew leases at below-market rates. This year’s update to the Calculator has been a game-changer, with tenants facing rent increases of up to 20%.

While this has created challenges for tenants, particularly those being priced out of certain areas, it was a necessary adjustment for landlords in mid-market areas to realize the investment potential of their properties. By next year, we anticipate that prices will stabilize, bringing equilibrium to the market.

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Long-Term Residency Planning

The changes to the Rent Calculator have prompted many tenants to consider long-term residency in Dubai, especially those who have lived in the city for over five years and seek stability. This shift has driven many tenants towards the buying market, as mortgage payments often present a more cost-effective alternative to rising rents.

For those who continue to rent, there has been a trend towards exploring areas further from the city center with high development potential. Dubai South, for example, has become a rental hotspot following plans to transform Al Maktoum International Airport into Dubai’s main aviation hub. Additionally, multi-year contracts and more flexible payment terms have become more common.

Increased Tenant Awareness

Tenants are becoming more knowledgeable about their rights and the regulations governing tenancy contracts, empowering them to protect themselves from overzealous landlords. In the past, landlords could evict tenants without notice, and even recently, some attempted illegal evictions for higher-paying tenants. However, tenants are now better equipped to handle disputes and enforce their rights.

The Impact of April’s Rainfall

A notable event in the first half of 2024 was the record-breaking rainfall in April, which took the UAE by surprise. Although Dubai recovered quickly, the event raised concerns among tenants about community security. Consequently, tenants are now more thorough in their inspections of homes, prioritizing quality and safety, and frequently inquiring about drainage systems.

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Looking Ahead of 2024

Several factors are expected to drive rental growth in the second half of 2024. The Dubai Land Department is collaborating with property portals to eliminate fake listings, enhancing consumer trust. Additionally, political uncertainties in Europe and the US reinforce the UAE’s appeal as a safe haven.

While more supply is anticipated over the next twelve months, I do not expect it to soften prices. Sustained growth in the rental market is likely as more people worldwide view Dubai as their long-term home.

Conclusion

The first half of 2024 has been a period of significant transformation and growth for Dubai’s real estate market. With robust regulatory changes, a shift in tenant behavior towards long-term residency and property ownership, and an increasing awareness of tenants’ rights, the market is becoming more balanced and sustainable. The unusual weather patterns and subsequent emphasis on property quality and safety have further contributed to this dynamic environment. As we move into the second half of the year, the outlook remains positive, with continued growth anticipated in the rental sector. Dubai’s appeal as a global hub and safe haven will likely attract more residents, solidifying its position as a leading real estate market.