Villa Rents Surge 13% Annually, While Apartment Rents Soar by 22%
The Dubai real estate market continues to experience significant upward pressure on rental prices, with the latest industry reports indicating a persistent trend that has now stretched into its 14th consecutive quarter. This prolonged period of rising rents is reshaping tenant behaviour, with a marked increase in lease renewals as residents seek to avoid the challenges of relocating in an increasingly competitive market.
According to recent data, the second quarter of this year saw a 14 percent annual increase in the number of lease renewals across Dubai. This surge in renewals is a direct response to the steep climb in rental prices, with apartment rents skyrocketing by 22 percent compared to the same period last year, while villa rents have seen a robust 13 percent year-on-year increase.
The impact of these rising rents is being felt acutely across different segments of Dubai’s population. Household incomes are struggling to keep pace with the escalating cost of housing, leading to a contraction in disposable incomes for many residents. This financial squeeze is particularly pronounced in the mid-market apartment districts, such as Discovery Gardens, Dubai Sports City, and Dubailand, which have experienced the steepest rent increases. In contrast, prime districts have seen comparatively lower levels of increase, though still significant in absolute terms.
In response to the dynamic market conditions, Dubai’s Real Estate Regulatory Authority (RERA) has taken steps to ensure fair practices. Earlier this year, RERA updated its rent calculator, a tool that plays a crucial role in determining permissible rent increases for existing tenants. The recalibration, which took effect on March 1, aims to make the calculator more representative of open-market pricing. This move underscores the authorities’ commitment to maintaining a balance between landlord interests and tenant protections in a rapidly evolving market.
The rental market trends are mirrored in the sales sector, where residential prices in Dubai have continued their upward trajectory for the 16th consecutive quarter, marking a 21 percent year-on-year increase. However, a nuanced picture emerges when examining different market segments. While prime districts have seen a relative moderation in sales price increases, mainstream and affordable districts are witnessing steep rises that are beginning to impact their affordability for potential buyers.
Dubai’s position as a global ultra-prime market remains strong, with over 305 residential properties sold for above AED20 million in the second quarter alone, representing a 12 percent annual increase. However, there has been a noticeable slowdown in off-plan transactions over the past two quarters, primarily due to lower inventory availability in this high-end segment. Despite this, secondary market ultra-prime transactions have maintained steady activity levels, with 135 transactions recorded.
The supply side of the market is also evolving. The second quarter saw a delivery of 5,391 units, a decrease from the 8,350 units delivered in the preceding quarter. Looking ahead, a total of 24,300 residential units are anticipated for delivery over the remainder of the year, bringing the projected annual total to nearly 39,000 units. This figure aligns closely with 2023 deliveries and appears to be in step with market demand.
New project launches continue to set records, with a 42 percent annual increase, reflecting ongoing buoyant demand and robust absorption rates. A significant shift in market dynamics is evident in the growing disparity between off-plan and secondary market transactions. While secondary market transactions saw a moderate growth of 5 percent, off-plan transactions experienced a substantial spike of 61 percent. In the second quarter, off-plan transactions more than doubled the number of secondary market transactions, suggesting a higher proportion of investors in the off-plan market compared to end-users.
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