Back to Dubai: why tenants are choosing Dubai over Sharjah and Ajman again

17.08.2016
Dubai’s satellite-cities are losing their tenants due to reverse migration to Dubai, despite high average rents.

Some time ago, namely from 2005 through 2009, many tenants were priced out of Dubai by excessively high rents, which forced them to seek more affordable accommodation options in the neighboring emirates of Sharjah and Ajman.

Currently more than 1.1 million people working in Dubai still live outside, for such emirates like Sharjah, Ajman and Ras Al Khaimah can offer rents 30-40% lower than in Dubai.

But lately, Dubai real estate market experts started registering a reverse trend: despite the consistently high average rents, tenants return to Dubai en masse. Unitas Consultancy together with the real estate portal Reidin conducted a study entitled ‘Dubai: Growth and the Second City’, which examined tenants’ overall motivations and behavior strategies when moving in or out of Dubai.

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Attracted back to Dubai by temporary plunge in Dubai rentals at the initial stage of the crisis, tenants are still not coming back to northern emirates, even when prices surge up again. Why is this happening? In fact, the reasons for such behavior are simple. Firstly, it is the supply: Dubai housing market started offering more affordable rents. And secondly, the costs, both emotional and material, of moving back and forth often outweigh the desire to save on rent.

Since March 2015 more than 100 hectares of land have been allocated for affordable housing construction in Dubai. This initiative was mainly developed to meet the demand for people earning between AED3,000 and AED10,000 per month. More than 50,000 people are now able to afford renting of buying an off-plan apartment in areas such as Muhaisnah 4, Al Qouz 3 and 4. And there will be more of such areas — Abdulla Mohammed Rafia, Assistant Director General for Engineering and Planning Sector, Dubai Municipality, has promised.

“We have many more areas where similar housing will come up,” had said.

However, given all these facts, the uniqueness of Dubai and its paradox is that the average capital and rental yields for property investments, which is currently registered at a rate of 7% per year, are still of the world’s highest and won’t decrease, the emirate’s authorities promise. Such a balance is created by the other market extreme, i.e. by the high-end luxury real estate market, where rentals are still rather high, while the price per square foot is rather low compared to similar offers in other big cities.

Thus, it all seems to be balanced in Dubai, and everyone here can find exactly what they are looking for, whether it be an affordable apartment for rent or a luxury real estate unit for investing.

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