Dubai rents are set for a massive shake up with a new pricing system, due to which prices may be determined by the building quality and not the neighbourhood. A new Rental Index will govern how much landlords and building owners will be able to hike prices for tenants.

Currently, proposed changes are being discussed, namely that the Dubai rental index should be based on the quality of individual buildings, rather than the area in which they are located. The latest updates came amid a 27% increase in Dubai rental costs this year.

At the moment, rentals in the emirate of Dubai are calculated on the location rather than the property type. Areas with higher rents due to their location include Al Barari, JLT, Palm Jumeirah and Dubai Marina. Here tenants can find a range of rental options based on building quality and rents are provided with varying budgets and more options. A district with multiple residential buildings such as Dubai Marina, for instance, will not have a blanket coverage in the updated Rental Index.

However, the changes seem to affect only apartments so far, with the exception of villas. The significant change under consideration is that the amount by which landlords can increase the rent will be determined by the star rating of the building. Prices will not depend on the area in which the property is located.

Landlords will need to justify rent increases in each building. The quality, age and available facilities of the building will need to be taken into account.

A rating system for residential real estate in the emirate of Dubai was launched in 2015 and covers apartment buildings in the city. Real estate objects that meet sustainability targets and have “green” credentials belong to the category of five-star building properties.

Within the framework of the new system, four-star buildings, regardless of district, will have more control over the timing and size of rent increases. Landlords in three-star complexes and below will have to justify rent increases on an individual building basis.

As stated in media reports, the Rental Index in Dubai may be updated as early as next year, if approved by the authorities.

According to the Ejari data, the number of new contracts registered year-on-year in the year to October 2022 decreased by 4.7%, while renewals have increased by 33.6%. These indicators show that tenants are less willing to move against the background of current market conditions. The number of listings are down 6.7% month-on-month.

The price of renting real estate in the emirate of Dubai has increased this year, with the average cost of renting a villa or family home in Dubai reaching AED 268,758 (USD 73,171) as of September.

Average rental prices for apartments, meanwhile, soared 27% to AED 89,986 (USD 24,500). According to experts, the surge in rental prices is being driven by a growing number of expatriate workers moving to the city.