Dubai: Why tenants are renewing contracts despite increasing rents

Dubai tenant Salim Ahmed received an increase notification from his landlord that took his annual rent out of his budget. However, the expat has decided to not move homes.

“My landlord has increased the rent by around Dh5,000. Initially, I thought of moving to a different apartment in the area, but when I calculated the cost of shifting to a new place, I realised it wouldn’t make much of a difference,” he said.

Ahmed is among an increasing number of tenants who are choosing to stay put in the face of rent increases.

The number of new tenancy contracts has shrunk in the first eight months of this year as tenants are increasingly renewing their existing contracts.

According to CBRE Middle East, a total of 376,211 rental transactions were registered in the year to date to August 2023, marking an 8.7 per cent increase compared to the year prior, and a 48 per cent increase from the comparable 2019 period. This growth has been supported by a 28 per cent growth in renewed registrations, while new rental contracts registered have dropped by approximately 12 per cent.

“This significant decline in new rental registrations arises from the elevated costs that can be incurred when relocating or taking on new leases, which, as a result, has created substantial bifurcations between new and renewed rental rates,” said Taimur Khan, head of research at CBRE Middle East.

Noor, another tenant, said relocation costs are almost equal to the rent increase. “Plus, there is wear and tear on household items when relocating to a new flat. And I am very sensitive about my items because I collected them very carefully,” said Noor, who has been living in Dubai for the past 20 years.

Increase in rents

According to H1 Dubai Property Market Report released by Bayut, rents for affordable apartments in the emirate’s popular districts have increased by up to 17 per cent. The cost of renting luxury apartments has significantly appreciated by up to 32 per cent. Similarly, reasonably-priced villas in popular neighbourhoods have experienced upticks of up to 50 per cent in rents, whereas the cost of renting luxury villa properties has increased by up to 70 per cent.

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