Dubai’s mid-income communities record highest rental growth as more tenants opt to renew leases

Residential rents have increased for the 15th consecutive quarter, report says

Tenant demand is shifting towards more affordable and mid-market districts like Discovery Gardens in Dubai. Jeffrey E Biteng / The National

Communities in Dubai such as Discovery Gardens, Dubai Sports City, Dubailand and Jumeirah Village Circle recorded the highest rental growth in the third quarter as tenant demand shifts towards more affordable and mid-market districts, a report has shown.

Rents in Dubai increased for the 15th consecutive quarter, and by 18 per cent annually, property consultancy Cushman and Wakefield Core said.

Apartment rents increased by 19 per cent annually, while villa rents recorded a more moderate increase of 13 per cent, indicating a trend towards stabilisation in the villa segment as prices approach affordability thresholds, the research found.

Prime rental growth has moderated in areas such as Palm Jumeirah and Dubai Marina, both experiencing single-digit increases.

There has also been a continued increase in lease renewals, which rose by 16 per cent in the third quarter.

“The new Real Estate Regulatory Authority rental calculator has helped narrow the gap between new and renewed rental rates. However, new leases are still trading at an average premium of 14 per cent over renewals,” the Cushman and Wakefield Core report said.

Dubai's Real Estate Regulatory Authority updated its rent calculator earlier this year. The Rera calculator, which was recalibrated on March 1 to become more representative of open-market pricing, is revised periodically.

Abu Dhabi also launched its residential rental index this year, aimed at providing indicative rental values for tenants and landlords across the emirate. The index is available online, on the Abu Dhabi Real Estate Centre’s website www.adrec.gov.ae.

Investment reforms and supportive regulations for businesses are enhancing Dubai's real estate market, S&P Global Ratings said in a recent report. Factors including the growing population, residency reforms such as the golden visa and high rents are also pushing people to buy property.

Dubai’s off-plan transaction volumes in the third quarter surged by 51 per cent compared to the same period last year, while secondary market sales saw a year-on-year increase of 19 per cent, according to Cushman and Wakefield Core data.

“In the third quarter, off-plan transactions were around 34,000, a figure 2.3 times greater than that of secondary market transactions,” Prathyusha Gurrapu, head of research and consultancy at Cushman and Wakefield Core, said.

“This reflects a growing shift in Dubai’s residential market towards off-plan properties, primarily fuelled by the appeal of attractive payment plans and increasing demand for property-linked visas.”

City-wide house prices rose for the 17th consecutive quarter and recorded a 20 per cent year-on-year increase.

By market segment, villa prices saw a 23 per cent rise year-on-year, while apartment prices followed closely with a 19 per cent increase compared to the same period last year.

Prime districts are experiencing a relative stabilisation in price growth and indicating signs of moderation in the upper end of the market. In contrast, mid-market communities are witnessing a sharp double-digit growth across both villa and apartment communities, the report found.

Approximately 9,157 residential units were delivered in the third quarter, bringing the year-to-date total to 22,900 units. An additional 10,700 units are projected for the fourth quarter, positioning the 2024 annual total at about 33,600 units, the consultancy estimated.

“While 2024’s supply remains moderate, the development pipeline is gaining momentum, with substantial handovers anticipated over the next two to three years. This increase in supply may contribute to market stabilisation,” the report said.

The ultra-prime segment remained strong with a 41 per cent annual increase in the number of transactions. About 424 residential properties were sold above Dh20 million in Dubai in the third quarter. Palm Jumeirah remained the location of choice accounting for the highest share of ultra-prime transactions.

“With growing ultra-high-net-worth demand for ultra-prime properties, particularly waterfront properties and branded residences, we foresee this segment to remain strong as global wealth continues to gravitate to Dubai,” Ms Gurrapu said.