Based on the recent update by the Dubai Real Estate Regulatory Authority (Rera) in early March this year, rents in Dubai have seen an increase of up to 15%, as per the report by Cushman & Wakefield Core. Protusha Gorapu, the head of research and consultancy at the firm, stated, “The rental index update by Rera reflects the rise in rents, with most areas seeing increases between 8% and 15%. We are observing a higher number of renewals compared to new contracts, as tenants prefer to extend existing agreements, which are still generally cheaper than new ones.”
Rentals in the second quarter of 2024 have surged by 19% year-over-year, accounting for 64% of the increase from the first quarter of 2020, prior to the COVID-19 pandemic. This continuous rise over the past 14 quarters has compelled tenants to renew contracts at higher rates.
In Q2 2024, rent for villas in Dubai increased by 21% in budget categories, 12% in mid-range, and 1% in premium areas. Conversely, apartment categories saw increases of 27%, 19%, and 14%, respectively. These rises are in line with a report released by Cushman & Wakefield Core on Thursday.
On the other hand, the secondary residential sales and villa rentals show signs of stabilization, as transaction volumes remain constant. Mr. Gorapu added, “We saw relative stability in rents for urban villas, which increased by 13% over the previous year, while rents for apartments rose by 22% compared to the same period last year. We have noticed a higher percentage of tenants renewing their contracts, with renewals in Q2 2024 up by 14%. Similar trends are seen in the sales market, with mid-range apartment areas experiencing the highest increases, while premium areas have seen lower rises.”
Mr. Gorapu continued, “The premium market saw more significant increases earlier in the 2022-2023 cycle, which are now stabilizing, whereas mid-range and budget areas are improving from historically lower bases.”
He further noted, “The rental market continues to favor landlords, with increases across all areas, although the pace of growth has slowed compared to last year. Household incomes are not keeping pace with rising rents, further reducing disposable incomes.”
Villas in Jumeirah Village Circle experienced the highest annual increase of 40%, followed by Jumeirah Park at 22%, and The Springs and The Meadows at 14%. However, all apartment areas saw annual rent increases, more so in budget-friendly areas, including Discovery Gardens at 32%, followed by Dubai Sports City at 28% and Dubailand at 24%.
According to the head of research and consultancy at Cushman & Wakefield Core, some stabilization in the rental market has been observed, as evidenced by a nearly equal number of rental listings at stable prices in the first halves of 2023 and 2024. He mentioned that the listing prices of Dubai properties saw a roughly 21% drop from rental listings in the first half of 2024 compared to 17% in the corresponding period in 2023.
As per the report by Cushman & Wakefield Core, sales prices across the city have continued to rise for the sixteenth consecutive quarter, increasing by 21% compared to last year. Mr. Gorapu noted, “We observed a relative adjustment in the increase of sales prices in premium areas, while primary and budget areas are experiencing sharp rises, though significantly impacting their affordability.”
In most areas of Dubai and pre-sale projects, initial pre-sale prices are higher than secondary pre-sale prices. Although the percentage difference remains in single digits, it indicates that sellers are struggling to maintain initial prices and are selling at slight discounts. Mr. Gorapu stated that monitoring this trend is crucial as more pre-sale supply entering the market might intensify in coming seasons.
The recent report highlights a significant increase in rentals in Dubai, especially in the apartment sector. This increase is linked to various factors, including heightened demand, limited supply, and the updated rental index by Rera.
Source: https://www.propertynews.ae
