Rising property prices in UAE
Property prices in the UAE have steadily increased since the beginning of 2013, creating new considerations for expats looking to rent or buy. Property consultancy firm Jones Lang LaSalle reported a 5% residential sales increase during the third quarter in Abu Dhabi, and a 6% increase in Dubai.
Although price increases are still below their market peak, consultants expect continued stabilisation and even positive growth. Global bank Standard Chartered said that Dubai is in the midst of a housing boom fuelled by fundamentals, not speculation.
The rise in housing demand comes on the back of larger economic trends, including a surging UAE economy boosted by strong hospitality and retail sectors. This might not be good news for expats who only intend to rent, but could signal a savvy investment for expats looking to buy.
Landlords in Dubai and Abu Dhabi typically enjoy yields that are more than double the global average, a figure that has been steadily increasing since the market began to recover around 2011. Since tenants usually pay rent in advance, landlords also tend to have greater leverage in the UAE than in other markets.
Moreover, buying UAE property can help expats qualify for long-term residency in the UAE, benefitting the many Western expats who intend to stay long-term.
However, the rebounding property market has played a major role in rising tension between landlords and tenants in the UAE. In large part due to constant rent increases, landlord-tenant disputes in Dubai have more than tripled since 2012, according to some property attorneys.
The UAE’s 2002 decision to allow foreigners to own property has opened a lot of doors for expats wanting to invest, but Dubai’s government has also recently capped home loans for foreigners and increased property sales fees from 2% to 4%. Meanwhile, Abu Dhabi has maintained its 2% registration charge and is looking to remove its 5% cap on rental increases, perhaps making it a more attractive location for new property owners.
Although reports from Standard Chartered and Jones Lang LaSalle indicate further increases in UAE rental prices, Dubai’s government is stepping in. Contrasting Abu Dhabi’s more lenient approach to its market, Dubai officials are working to curb rental hikes and lessen real estate disputes after a successful bid for the 2020 World Expo.
In order to better understand their rights and future rent increases, Dubai tenants can consult the Dubai Rent Index to calculate how much their landlords can legally increase rental prices.