From the Al-Jumeirah beach to the Burj-ul-Khalifa, Dubai is now for its extravagant landscape. Its development in the last couple of decades has been fueled by the lucrative oil industry. However, the country soon realized that it couldn’t continue relying on oil money.
That is where it started to diversify its economy by investing in different sectors, such as banking, aviation, tourism, etc. But one sector that saw massive development is real estate. Dubai is home to one of the most lavish buildings in the world and investors all over the world invest in its real estate market.
However, the economic boom and the high demand for property are also driving up the prices. As a result, there has been a significant increase in the rent prices. Some residents are facing an increase of 50% in their rents. Let’s learn more about it in this article.
The Growing Number of Investments in the UAE Market
Dubai has always been the investment hub for various investors globally due to its lucrative real estate sector. In just February 2023, there were around 8,500 transactions in Dubai’s residential market. Apart from the property market, the economic boom is also quite visible in everyday life.
You’ll find a new high-end restaurant opening up each week in the Emirati state. It is one of the primary reasons behind Dubai’s hustling and bustling life. The city’s changing landscape shows how it morphed from a small village into a hyper-modern metropolis.
Additionally, Dubai’s favorable trade laws have also made it an amazing destination for various businesses. To fuel that economic growth, Dubai has to rely on expats from all over the world.
Therefore, most of these residents in the city don’t have their own homes and live in rented properties. And the increased rental is hitting their monthly expenses, making it difficult for them to meet ends.
Landlords Finding Their Way Around RERA
Many people have reported an increase of around 60% when asked about the year-on-year growth for rentals. Residents in Dubai’s high-end financial district, the DIFC, have decided to move to different locations given the increasing rent prices.
The RERA (Real Estate Regulatory Agency) which is a body in Dubai’s Land Department has starting guidelines for increasing rent. Under those guidelines, a landlord cannot increase the rent price by a certain percentage depending on the market value of the property.
However, the DIFC has a separate legal entity, which means that it is unbounded by the RERA rules. Apart from the DIFC, rent prices are continuously soaring. The economic boom because of the recent world cup and the Dubai Expo has led to many people entering the market.
As a result, there is a shortage of houses in the market since Dubai has had the lowest availability since 2008. The property owners are aware of this situation, thus, they are continuously increasing prices. Some experts say that there are people who are willing to pay a high amount of rent.
Landlords are using different tricks to get around the RERA rules. They push out the tenants by claiming that they are either selling it or want to move in themselves. They’ll then rent it to a different tenant by charging a far higher rent than the RERA guidelines. Though this practice is illegal, most landlords tend to get away with it since they aren’t aware of their rights.
Russian Investors Entering the Market
UAE is liberalizing social and economic reforms, which has allowed it to gain the attention of various foreign investors. Most notably, Russians have now targeted the UAE’s real estate market after the war in Ukraine.
Russian investors moved towards Dubai after many Western countries put various sanctions on it. Consequently, Dubai become the hotspot for Russian investors who want to stash their money somewhere.
Additionally, the UAE has now normalized its relationship with Israel, leading to more investment from that nation. Furthermore, investors from Germany, Switzerland, the UK, and other nations are now also eyeing and investing in the Dubai real estate sector.
The booming real estate sector might be a lucrative opportunity for some, but for others, it is turning out to be a nightmare. While things might get better in the long run, most people will continue to experience high property rents in the short term.