Rents are going crazy and if Dubai wins the Expo 2020 bid, experts believe they will get even crazier. Some rents have risen by 40% in the last year alone so, the question remains – what is driving up the market? Is it really demand and supply or are real estate agents cashing in on an economy that’s on the up once again?
Take Sara’s story. Her parents have decided to move to Dubai to be closer to their daughter and her family. Sara started looking for a two-bed apartment in Jumeirah Beach Residence, finding prices were around the AED120,000 to AED130,000 mark depending on the view, the size of the apartment and the building’s location. That was what was presented to her by real estate agents.
But despite finding 100s of JBR apartments advertised, actually securing one was a different matter. And Sara blames the real estate agents. Sara found apartments advertised for rent in the morning were gone by the afternoon.
Other agents told her prices for a two-bed in JBR were now AED140,000 and anyone advertising lower than that amount was below the market price. Her search also found other apartment blocks that were charging AED100,000 for a two-bed apartment two months ago, are now advertising AED135,000.
And Sara is not alone. Other tenants complain of being asked to vacate their properties months or even weeks ahead of renewal, which goes against the guidelines set out by RERA stipulating tenants must be given 12 months notice.
And many more face huge rental increases on an existing villa or apartments that fall far outside the bands determined by RERA’s rent index, a guide to prices for Dubai.
As a result, landlords will try any trick they can to evict tenants in order to charge a higher rent to the next tenant. What mystifies tenants the most is why pushy agents, fully aware of the rules set out by RERA, are acting on behalf of landlords and sanctioning evictions and higher prices.
Whose interest do real estate agents represent?
In an ideal world, real estate agents represent the interests of both the landlord and the tenant brokering a deal that keeps the interests of both parties in mind. But, as tenants are finding, that is not always the case here.
“It is almost as if the real estate agents are pushing landlords to charge more and more so that they can increase their commission,” says David, who has been looking for a three-bed villa for his family for under AED150,000 and finding the search very difficult.
Sara agrees: “How can rent be going up every week? Is that even sustainable? And what is causing this madness? Could it be more demand with the number of new residents, not enough supply in the popular areas, or do real estate agents play a role as well?”
With many landlords being international investors that depend on an agent as a source of market pricing and rental yields, it is probably worth remembering that a real estate agent’s commission is a direct correlation of the rental price and comes out of the tenant’s pocket. Therefore, it is fully in a real estate agent’s interest to raise rents as far as possible.
However, we cannot forget the basic economics of demand and supply. Those living in Dubai during the downturn of 2008-2009 will remember the vast number of “For Rent” signs outside empty villas and apartment blocks. As people lost their jobs, demand for homes dropped along with the prices.
So as the economy begins to boom once again and more jobs are on offer, it’s only natural for rents to rise. And a steady rise is acceptable for an economy slowly picking itself up from the financial crisis. But a steep rise in prices is not.
Sadly, when rents are heading upwards, real estate agents will always step in to broker a bigger and better deal. So hold onto your hats tenants, because you are in for a rocky ride when it comes to finding a home that not only suits your domestic needs but also your budget.