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Many Dubai residents are taking full advantage of the decline in rental rates. Whether you’re planning to upsize your home or save money by renegotiating your current rent with your landlord or moving to a cheaper home, it’s the ideal time to do so. But it isn’t always easy to figure out the most suitable option if you intend to save money on your annual rent. You have to consider a number of factors and crunch some number to make an informed decision. To make this decision easier for you, the experts at ServiceMarket, the UAE’s largest marketplace for moving services, have put together some guidelines.
Compare savings on rent to cost of moving
If you’re living in one of the expensive areas in Dubai and are willing to move to a more affordable one like the newly developed suburbs of Dubai, which generally provide better value for money, then you might be able to save more by moving than renegotiating your existing rental rate.
But, first of all, you need to figure out whether or not it even makes financial sense for you to move to a cheaper home. The following calculations can help you decide.
Step 1: Calculate the cost of moving
Start the process by considering the cost of moving, which would depend on the amount of items in your home and the type of moving service you choose. For example, the average cost of moving your belongings to a new home ranges from AED 1000-2000 for one-bedroom apartments. You can save a significant amount of money by doing some comparison shopping though platforms like ServiceMarket that allow you to get free quotes from multiple movers and packers in Dubai.
Next, take into account the various costs associated with renting a new home:
● When you get a new lease agreement, you’ll have to pay 5% of the total rental agreement to the real estate agent.
● You will have to register your tenancy contract with Dubai Land Department’s Ejari system, for which you should expect to pay AED 215.
● Pay a 5% move-in security deposit to your landlord before you move in. You can get the full amount back when you move out of house if you return it in its original state.
● When you get a new DEWA account, you’ll have to pay a connection fee of around AED 110 for small meters and a security deposit of AED 2000 for an apartment.
● In addition, you might have to face other costs such as buying new furniture, painting, cleaning, renovations, etc.
Step 2: Calculate savings on rent over the next two years
You can compare the average rent range for your area with that of other areas using the Dubai Land Department’s Real Estate Regulatory Authority (RERA) rental increase calculator. Once you’ve picked an area and decided the size and type of property you want, you can calculate the difference in annual rent, and then find out how much you’ll be able to save over the next two years.
Step 3: Compare
Once you’ve added all the costs mentioned in ‘Step 1’, and found out how much you can save on rent by moving, compare the two. If the amount you’ll be able to save is larger than the cost of moving, then it makes financial sense to move. Otherwise, it would be better to stay in your existing home.
If you have decided to move to a cheaper home and are in the process of negotiating the rental rate, see if your landlord is willing to discuss other options like more parking spaces, waiving the rent for one or two months, the number of cheques to pay the annual rent, and free home maintenance.
When is it better to renegotiate?
If you’re happy with your current home and your landlord is willing to renegotiate the rent to your satisfaction, then obviously it makes more sense to stay instead of moving to another home, which, as we’ve seen, can be a costly and time-consuming process. It’s important to realize that in the current buyer’s market, most landlords would prefer to renegotiate rental rates, especially if they’re happy with their tenants. Given the growing number of vacant properties in Dubai, landlords are keen to keep good tenants because they lose a lot of money if their house stays vacant for a long period of time.
But renegotiations might not work if your current rental rate is already below the average rent range for your area. To find out if that’s the case, use the the Dubai Land Department’s Real Estate Regulatory Authority (RERA) rental increase calculator to see the average rent range for your area and then compare it to your current rental rate. You should feel confident while renegotiating the annual rent with your landlord if your existing rent is above the range showed by the rental increase calculator. Be sure to start the negotiation process at least a couple of weeks before the start of the notice period specified in your tenancy contract.
While it’s currently a buyer’s market, many realtors are of the opinion that prices might stabilize after the first quarter of 2019. This means that if you want to leverage the lower rent rates to upsize or save money, then now is the right time to make a move.