Dubai Apartment Rents in July Reach Highest Point Since February 2017

07 Oct, 2023

Dubai Apartment Rents in July Reach Highest Point Since February 2017

Dubai's property market witnessed a significant milestone in July as average apartment rents reached their highest levels since February 2017, according to a report by consultancy CBRE. Additionally, average villa rentals also set new records, reflecting the ongoing surge in property demand within the emirate.

The report reveals that apartment rents in Dubai surged by nearly 22% annually during the month, while villa rents recorded a remarkable increase of 22.6%, as indicated in CBRE's latest rental market analysis.

On average, residential rents across Dubai as a whole climbed by an impressive 22% over the reporting period, underscoring the buoyancy in the local real estate market.

CBRE noted, "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."

Data from the Dubai Land Department showed that in the year-to-date to July 2023, the total number of tenancy contracts reached 325,727, marking a substantial 43.5% increase compared to the same period in 2019.

Dubai's property market resurgence can be attributed to several factors, including government initiatives like residency permits for retired and remote workers, along with the expansion of the 10-year golden visa program. Economic gains from Expo 2020 Dubai and higher oil prices have also provided momentum to the property market's growth.

A recent report by consultancy Knight Frank revealed that residential real estate prices in Dubai had risen by 17% in the second quarter of the year compared to the previous year, marking the 10th consecutive quarter of expansion.

The property market's vitality is further exemplified by a 40.7% increase in the total number of $10 million home sales during the first nine months of the year, reaching a record high of 277. This surge is driven by the growing demand for luxury homes in the emirate.

CBRE's report underscores the "significant fragmentation" within the rental market, where more tenants opt to renew their contracts to minimize the additional costs associated with acquiring new leases.

The data revealed that the total number of new contracts registered during the month dropped by 12.6% on an annual basis, while renewals grew by 29%. This trend indicates tenants' preference for remaining in their current residences, especially in prime residential areas, while benefiting from the protection offered by the Rera (Real Estate Regulatory Agency) rental regulations, which limit annual rental increases to a maximum of 20%.

The report also highlighted the average premium for new rental contracts, which was 20.1% for apartments and 25.2% for villas in July. CBRE anticipates that, due to the undersupply in the villa segment, this level of premium is unlikely to significantly decrease in the immediate future. However, as rental levels stabilize in the long term, the premium is expected to shrink as new renewals align with market rates.

Furthermore, the report pointed out that premiums on new rental contracts for apartments have been declining since January 2023, and this trend is likely to persist as renewals gradually adapt to market rates.