Dubai's Property Market: Why Rents Are Increasing Rapidly

Dubai's Property Market: Why Rents Are Increasing Rapidly

Rents have been steadily rising in Dubai after the pandemic on the back of an increase in population, inflow of high-net-worth individuals, and expansion of the economy creating new jobs in the market.

Tenants nearing the end of contracts are facing tough negotiations with landlords, whose properties have been revalued by the Dubai Land Department under the Real Estate Regulatory Authority (Rera) rent calculator.

The increase in prices in prime villa communities is leaving some tenants facing the prospect of moving to more affordable areas. In the first quarter of 2024, Dubai Land Department data showed rental registrations were up 5.8 percent from 2023, at 159,941.

Real estate consultancy CBRE figures backed up the trend that more tenants were looking to renew existing contracts with a rent increase, rather than move into an overheated rental market.

Growth in new rental registrations for the first three months of the year stood at 12.3 percent, while the number of new contracts registered fell by 4.1 percent, CBRE data showed. Firas Al Msaddi, chief executive of fam Properties, said yearly rentals in Dubai are at an all-time high.

The Key Factors which Impact the Rental Market Price

Market Growth

Analysts have now forecasted that the current three-year bull run will continue through 2025. The fast growth of Dubai and the talent attraction also play a role in maintaining the prices. However, significant supply improvement is not expected to happen before the 2026-2027 academic year. This long-term view should be taken by investors and those who are planning to buy a house.

Demand for High Net Worth Investment

Some experts predicted that the market would slow down because of low investment from Russia but investors from other markets such as the United States and Canada continue to buy properties in Dubai. They are confident in the city’s prospects and this guarantees demand persistence.

Areas with the Highest Rise in Rental Price

Data from Allsopp & Allsopp shows that the areas that recorded the highest rise in the first half of 2024 were Jumeirah Beach Residence (JBR), Town Square, Dubai Production City, Dubai Healthcare City 2, and Meydan, which all saw a 21 to 22 percent jump in rentals.

Additionally, Dubai South's average rents increased by about 38 percent compared to H1 last year, aligning with the expected increase in demand following the announcement of the new Al Maktoum Airport earlier this year.

Bramley noted that some of the best performers in H1 2024 included Tilal Al Ghaf with 21% rise in rent, Dubai Hills Estate (14 percent), The Villa Project (12 percent), and Dubai Creek Harbour (11 percent), all experiencing an increase of over 10 percent in average rental price per square foot.

In summary, as the city continues to attract talent and investment, the rental market is poised for sustained growth, presenting both challenges and opportunities for tenants and investors alike.

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