Despite claims that the property sector is bottoming out or showing signs of recovery, overall rents across the emirate are still on decline.
With fewer jobs, there are fewer people with money to pay for rent.
Compounding the decline in demand is the increase in supply of new properties.
Just this year alone, some 30,000 units are expected to be turned over to investors. So far, about a tenth of the number has already been delivered.
As a result, according to Propertyfinder Group’s UAE Real Estate Trends 2017 report, Dubai residents have gained more negotiating power when it comes to dealing with landlords.
“New tenants and their brokers have been able to negotiate concessions that were previously dismissed or largely unheard of in the Dubai market, such as rent-free periods.”
A quick look at various property listings in Dubai shows owners enticing potential tenants with “free” rents, especially for flats that have recently been delivered. “Brand new, one-month free [rent], with appliances,” reads one listing.
Landlords are also resorting to other concessions, such as reducing rents for existing tenants, accepting multiple cheques and paying broker commissions. Owners have no other recourse, considering that they stand to lose money if their property stays empty even for just one month.
“Considering a one-month vacancy period equates to a loss of 8.3 per cent, which typically is close to, if not more than, the yield that most properties produce annually, concessions like these are not only smart business for the investor, but a win-win for all parties regardless of the market,” wrote Zhann Jochinke, chief executive officer, Keller Williams Real Estate.