A Dubai market report has shown an increasing number of tenants are renewing their existing residential leases after two years of significant rent hikes.
Real estate consultancy CBRE found many residents are not prepared or able to pay higher rates on new leases. Its latest report also suggests that the change may be due to a lack of available stock particularly in prime and core residential areas.
Data from the Dubai Land Department revealed that in the year to date to March, the total number of rental registrations stood at 159,941, marking an increase of 5.8 per cent from the previous year.
This growth has been underpinned by a 12.3 per cent growth in renewed rental registrations, whereas new contracts registered recorded a decline of 4.1 per cent, CBRE revealed.
Rental growth in Dubai has accelerated this year, after a period of moderation last year.
In March, average residential rents reported an annual increase of 21.2 per cent, up from the 20.4 per cent growth a month earlier, according to CBRE.
Over the period, average apartment and villa rents grew by 22.1 per cent and 14.5 per cent, the report found.
As of March, the median apartment and villa asking rent stood at Dh123,429 and Dh344,658, it said.
“In Dubai, residential rents will continue to increase; however, not at the same rate that we have been seeing to date, and we expect that the rate of change will diminish in the second half of the year,” Taimur Khan, head of research for Middle East and North Africa in Dubai at CBRE, said.
The Real Estate Regulatory Agency rent calculator was recalibrated on March 1 to become more representative of open-market pricing.
This is expected to be a double-edged sword for tenants, analysts told The National.
The calculator is revised periodically for certain communities and buildings to reflect current market rental rates. It shows whether or not a rent increase is allowed and uses criteria such as location, property type, current rent and number of rooms and works by comparing properties with similar ones nearby.
Rents in Dubai rose 19 per cent year-on-year last year, compared with 27 per cent the previous year, property consultancy Cushman & Wakefield said in a market report.
It said many tenants were opting to stay put because rental increases during renewals are much lower compared to signing new leases, but several renewing this year will face higher rent due to the adjustment in Rera's calculator.
Price growth also continued to accelerate during the first quarter of 2024, with average sales prices increasing by 20.7 per cent in the year to March, the CBRE report found.
Throughout this period, average apartment and villa prices increased by 20.4 per cent and 22.1 per cent.
Although headline median sales rates are still marginally below the 2014 highs by 0.1 per cent, several prominent residential neighbourhoods have already surpassed their 2014 figures, CBRE said.
As of March, mean apartment prices stood at Dh1,486 per square foot, and average villa prices reached Dh1,776 per square foot. Standard villa sales rates are currently above their 2014 baseline by 22.9 per cent, according to the consultancy.
“The UAE’s residential market started the year on a relatively strong note, where the elevated demand levels continue to drive performance,” Mr Khan said.
“The strong levels of activity and high absorption levels, which have reduced available supply, will continue to support price growth in Dubai over the remainder of the year.
“Looking ahead, we expect Dubai’s residential sales market to maintain its upward trajectory. Prices in both the apartment and villa segments of the market will continue to grow, however, not at the same pace.”
In terms of supply, 6,526 residential units were delivered in Dubai in the first quarter, with 59.7 per cent of this stock being located in Meydan One, Jumeirah Village Circle and Al Furjan, the report showed.
Over the remainder of the year, 46,086 units are expected to be handed over, with 31.4 per cent of this stock scheduled for delivery in District Seven, Damac Lagoons and Business Bay.
Given previous materialisation rates, CBRE estimated that only a limited portion of this upcoming stock will come online as planned.
