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The recent buzz in Dubai’s post-pandemic residential property market has been around the sales of villas and townhouses, with prices rising as families who have experienced lockdown together seek more spacious homes – a trend that is also being seen in rental properties.
But what impact is Expo 2020 having on Dubai’s residential rental market? Asking rents are up on last year according to experts, but it remains to be seen whether the event itself will have the same impact as when Dubai won the bid to host the expo nearly eight years ago, when prices in the emirate spiked as landlords cashed in on the momentum.
Asking rents are rising
Data from ValuStrat, which tracks asking rental prices, shows landlords of villas are seeking higher increases than apartment owners, but rises are not yet on the scale seen post Expo bid.
In the wake of Dubai’s Expo bid, asking rents increased by 50 percent in less than a year in 2013. Afterwards, landlords saw their rental income half from the peak, with apartment rents declining by 62 percent and villas by 40 percent, said Haider Tuima, head of real estate research.
Data shows that asking rents have also increased year on year: “Dubai’s asking rental data evidence for Q3 2021 suggests that on average, villa landlords or realtors are asking for 14.1 percent more in annual rents than last year, this is compared to 2.6 percent annual increase for apartments,” he said.
Villa prices up; apartments languish
Faisal Durrani, partner and head of Middle East research at Knight Frank, said: “Much of the euphoria was already priced in when Dubai was awarded the rights to host the World Expo and the pandemic has likely curtailed any significant second ‘Expo-bounce’.”
“Lease rates for villas continue to climb, while apartments continue to languish. Apartment lease rates, while improving gradually, remain 5.3 percent below this time last year, while villa lease rates are up almost 15 percent on last Autumn and rose by 4.5 percent in Q3 alone, according to preliminary data,” he added.
Looking slightly further back, villa lease rates have recovered far quicker since the start of the pandemic, having risen by about 10 percent, whereas apartment rents are down by about 12 percent in the same period, Durrani said.
Average villa lease rates of AED 60 per sq.ft. are still 25 percent below their Q1 2015 peak, according to Knight Frank data, while apartment rent rates are nearly 40 percent below that period.
Rents, prices up in prime areas
Lynnette Sacchetto, director of research and data at Property Finder, said prime apartment areas such as Dubai Marina, Jumeirah Beach Residence and Downtown Dubai, as well as villa and townhouse communities have seen increase in rents. Sacchetto expects villa and townhouse prices to continue to increase.
“Of course, landlords have taken a hit during the pandemic and are now trying to recover by raising rents in areas where rents have stabilised or have increased,” she said.
Sacchetto pointed out that landlords can only increase rent according to the RERA rent calculator, which allows a maximum increase of 20 percent, and then only with 90 days-notice before the end of a tenancy.
Elias Hannoush, managing director, Morgan’s International Realty said it will be one-to-two months before any Expo effect on long-term rentals is revealed.
Morgan’s data shows apartment prices up 2.3 percent in the last three months, but 2.7 percent below what they were in 2020.
“Prices in most of the communities in prime locations are up compared with a year back, however average price per square foot is down due to multiple new communities being handed over in the affordable segment, such as new supply in affordable communities like Dubailand, that’s what pushed the prices down,” he said.
Thinking short-term
According to Property Finder’s Sacchetto, Dubai’s short-term rental market is witnessing more demand due to Expo 2020. However, there is potential for the segment to become saturated, and the next six months will reveal the balance between supply and demand.
Areas to watch will be those around the Expo 2020 site itself. Al Furjan, Discovery Gardens and Dubai South will most likely stabilise and see an increase, she said.
Thomas Poulson, leasing director at haus & haus, said landlords who are increasing prices may be reacting to local price increases, or, they may be considering selling or converting to short-term lets.
He described short-term rentals as an emerging trend in the Dubai property market thanks to the potential higher yield if landlords can secure year-round occupancy.
“For sure, Expo is a contributor to that, but the reality is with travel restrictions easing, short-term demand continues to rise, and there is a lack of stock in the market to meet this demand.”
(Reporting by Imogen Lillywhite; editing by Seban Scaria)
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