'downsizing' is best option to save on rents amidst job worries
A new residential rental sub-market is opening up in the UAE as residents look to “downsize” after getting hit with salary cuts or worries about likely job losses in future. Their intention is to try and save as much as possible on their rental expenses… and landlords are taking note.
Older buildings with smaller apartment sizes are seeing a fresh wave of demand, with landlords willing to lower their rents even below the market average. In Dubai, locations such as Deira, Bur Dubai and Al Ghusais are capturing much of this downsizing shifts.
A one-bedroom apartment in Deira, for instance, starts from Dh25,000 a year after a 13 per cent decline in rents in that area in the 12 months to end-September. In International City, a one-bedroom could be had for even Dh20,000, according to the latest market update from Asteco, for those tenants wanting to cut down on expenses as much as possible.
Even in Sharjah, this trend is visible, with older buildings and landlords willing to sacrifice on their demands being the beneficiaries.
“While numerous residents are downsizing in terms of unit sizes, quality specifications and/or location, others are repatriating to their home countries,” said John Stevens, Managing Director at Asteco, the property consultancy. “Or sending their extended family back due to job losses, salary cuts and/or simply as a pre-emptive measure given current uncertainties and risks.”
Even in new buildings
Market sources say that rental changes are not just apparent in older buildings and established locations. Apartments at a recently completed freehold building in Dubai Healthcare City has its landlords offering multiple rents - all below Dh30,000.
In fact, discounts on rents are common now, and tenants can also ask lower down payments or even monthly cheques.
Short term leases?
In a sign that these are unprecedented times, many landlords are even willing to rent on short-term leases, something that residents concerned over their job situation will find handy to take up. It also helps landlords, because in the current situation, tenants can exit their leases without penalty if they show loss of job as a reason.
“In order to address current concerns over employment/business growth and job security, discounts and incentives offered by residential - and commercial - landlords are crucial to retain existing tenants as well as attract new ones,” says the latest Asteco findings.
Not touched bottom yet
As per Asteco’s estimates, the average rental decline in Dubai for apartments in the 12 months to end September was 13 per cent. It expects further drops for the next six to nine months, “with a chance of rental declines slowing down in the second half of 2021”.
Sharjah’s rental dynamic
Interestingly, while relatively high-end apartments in Sharjah saw rents drop by an average 4 per cent between July and end September, units further down managed to retain their current levels. “We found accommodation at the lower end of the rent bracket in Sharjah is becoming increasingly scarce,” said Stevens. “It is uncertain, however, whether that is due to the lack of affordable housing or the lack of flexibility of landlords to reduce rates.”
But the dominant theme in the rental market across the northern emirates relates to tenants’ worries about possible job losses.