Dubai Property Fees Set for a Rise
Dubai Real Estate: Service Charges May Rise by 10%
The Dubai real estate market is becoming increasingly dynamic, with numerous changes in recent years directly affecting both property owners and tenants. One of the most crucial factors that every property buyer and tenant should be aware of is service charges. These charges could increase by up to 10% this year, primarily due to rising operational costs. What leads to this increase, and how does it affect owners and tenants?
Why Are Service Charges Increasing?
Service charges are recurring costs that property owners must pay to ensure the proper functioning of shared areas and services in residential buildings or communities. These include cleaning, security services, landscaping, waste management, repairs, and general maintenance of the building and community. Administrative and management costs, as well as utilities, are also included.
This year, several factors contribute to the increase in these charges. Industry experts point out that rising operational costs, such as the maintenance of common areas, district cooling fees, and high utility costs, play a significant role in this process.
A partner at Driven Properties highlighted that service charges have increased by an average of about 10% in Dubai in 2024. However, this increase is not uniform: different residential communities experience varying degrees, depending on the services and maintenance needs of the specific developments. For example, Bulgari Resorts and Residences on Jumeirah Bay Island currently has the highest service charge at 53.7 dirhams per square meter, while Jumeirah Village Circle or Dubai South offer lower charges.
The Age and Condition of Buildings Also Affect Charges
Older buildings require more frequent maintenance, such as infrastructural improvements or the replacement of outdated equipment. These costs often lead to higher charges. Newer or well-maintained developments expect lower increases, but due to inflationary pressures and market growth, service charges generally show an upward trend.
The founder and president of Elton Real Estate Development confirmed that the rise in service charges is caused by inflation, as well as the increased costs of materials, labor, and utilities. Higher bills from the Dubai Electricity and Water Authority (Dewa) and increased district cooling fees have significantly raised operational costs. Additionally, stricter government safety and sustainability regulations also contribute to cost increases.
How Does It Affect Owners and Tenants?
The increase in service charges directly impacts both owners and tenants. According to Shroff, owners often raise rental rates to compensate for higher service charges. However, the possibility of increasing rental rates depends on market demand and the Real Estate Regulatory Authority (RERA) rental index regulation. In competitive areas, owners may absorb the costs to retain tenants, while in high-demand locations, they can more easily increase rental rates.
Service charges do influence purchasing decisions, but they are generally not the primary concern. Location, expected investment returns, and the lifestyle offered by the community are much more important factors for potential buyers. However, high or rapidly increasing service charges can be a deterrent, especially for buyers planning long-term investments.
What to Expect in 2025?
Experts suggest service charges may continue to rise in 2025, although the extent of increase will vary depending on the age and condition of each development. Newer and well-managed projects are expected to see lower increases, while older buildings may experience further increases due to higher maintenance costs compared to the current level.
Overall, the Dubai real estate market remains dynamic, and the rise in service charges is part of this process. Owners and tenants should keep an eye on these changes to make the best possible decisions in the future.
