Dubai's average apartment rents in July reached the highest levels since February 2017, while average villa rentals also broke records as demand for property continues to rise in the emirate, a report has shown.
Apartment rents in Dubai surged almost 22 cent annually during the month, while villa rents rose 22.6 per cent, consultancy CBRE said in its latest report on the the rental market in the emirate.
On average, overall residential rents across Dubai climbed 22 per cent during the reporting period.
“Dubai’s rental market has witnessed a significant increase in ... activity in the past two years, ending the negative growth cycle that began in mid-2015 and lasted until late 2021,” CBRE said.
“Data from the Dubai Land Department revealed that in the year to date to July 2023, the total number of tenancy contracts reached a total of 325,727, a 43.5 per cent increase from the 227,011 contracts registered in the same period in 2019.”
Dubai's property market has bounced back strongly from the coronavirus-induced slowdown, helped by government initiatives such as residency permits for retired and remote workers as well as expansion of the 10-year golden visa programme.
The economic gains generated by Expo 2020 Dubai and higher oil prices also supported the property market growth momentum.
Dubai’s residential real estate prices rose 17 per cent in the second quarter on an annual basis, marking the 10th consecutive quarter of expansion, amid strong demand and robust economic growth, a report by consultancy Knight Frank last month found.
The total number of $10 million home sales in Dubai for the first nine months of the year rose 40.7 per cent to reach the record high of 277, driven by rising demand for luxury homes in the emirate, Knight Frank said this week.
CBRE said there is “significant fragmentation” within the rental market, as more people opt to renew their contracts to reduce costs they have to incur when taking up new lease contracts.
The total number of new contracts registered during the month dropped by 12.6 per cent on an annual basis, while renewed registrations grew by 29 per cent, it said.
“This indicates that tenants are less willing to relocate [as they want] to prevent the additional costs emerging from acquiring new leases, particularly in prime and core residential areas while taking advantage of the protection provided by the Rera (Real Estate Regulatory Agency) rental regulations, which seek to limit the annual rental increase permitted to a maximum of 20 per cent,” CBRE said.
The average premium for new rental contracts in the apartments category compared to renewed contracts in July stood at 20.1 per cent, while the average premium for new rental contracts for villas was at 25.2 per cent.
“Looking ahead, due to the undersupply within the villa segment of the market, we expect that this level of premium is not likely to decrease in any material manner in the immediate future,” CBRE said.
“In the long-term, as new rental levels inevitably stabilise, we are likely to see this premium shrink as new renewals adjust to the stabilised market rate.”
The report also said premiums on new rental contracts for apartments have been decreasing since January 2023 and this is expected to to continue "as renewals adjust to market rates".