Rental rates surged up to 31 per cent during the first half of 2024 due to consistently strong demand
New Dubai residents are moving faster from renting to owning properties to beat the rising rents in the emirate, as they plan to stay for a longer period, thereby helping absorb the new supply that is coming to the market.
Population growth in Dubai continues to fuel rental transactions, particularly in new developments where a significant percentage of the newly completed projects get absorbed by the rental market.
Rents in Dubai surged up to 31 per cent during the first half of 2024 due to consistently strong demand, resulting in a drop in availability of existing supply in both affordable and luxury segments.
Industry insiders say that rentals are increasing at a faster pace in the outskirts as residents and new residents are migrating to these upcoming areas due to still relatively more affordable rates in those areas.
“There is a notable trend where new residents rent for their first one or two years. Then, they become the next wave of buyers looking to settle here for the long-term due to business and lifestyle reasons,” said John Lyons, managing director, Espace Real Estate.
“New residents and the rental market in general help absorb a large number of newly completed properties. In Downtown Dubai, for example, there were three new buildings completed in 2023 and there have been over 550 new rental contracts registered in these buildings alone in the first half of 2024. It is very encouraging to see the market absorb this new supply so quickly,” he added.
According to Espace, average rents continue to soar in all but one of the communities, with transaction volume continuing to decline in the majority of communities.
“High rental prices, an affordable mortgage market, relaxed visa regulations and ongoing population growth are fuelling Dubai’s secular trend, whereby many tenants opt for homeownership as they set down their longer-term routes in Dubai,” it said.
“While there will be a surge of rental supply in 2025 and 2026, 80 per cent of this supply will be apartments. These tend to accommodate lower number households, and therefore the projected population growth required to absorb the supply is often overestimated,” said Lyons.
“What we are witnessing very strong transaction data at an Emirate-wide level is that Dubai is continuing to be built, community by community. Dubai’s super cycle of value and transaction volume growth is likely to continue for many years to come,” he added.
“Amidst the global economic slowdown and rising interest rates, we have noticed a pattern of investors worldwide turning to wealth-preserving assets. Dubai’s real estate sector has emerged as a standout choice in today’s economic climate, with prices and consumer interest continuing to rise even after 24 months of continuous growth,” said Haider Ali Khan, CEO of Bayut and head of Dubizzle Group Mena
With over 50,000 new residents moving to Dubai in the first half of 2024, Allsopp & Allsopp said demand for new properties across the market continues to outweigh the current supply coming into the residential market which is a clear and positive indicator that the market will remain on its current upward trajectory heading into the second half of 2024.
31% increase in rents in H1
According to property portal Bayut, rents in Dubai rose between 4 per cent and 31 per cent in the first half of 2024.
Mid-tier apartments saw a rental increase of up to 15 per cent while luxury apartment rentals rose by up to 7 per cent. However, some units in Business Bay and Downtown Dubai reported price decreases of under 6 per cent.
Budget villa rentals have jumped 12 per cent while mid-tier villa rentals have increased by up to 15 per cent. Luxury villa rentals have surged by up to 27 per cent, with Damac Hills recording the highest increase for its limited inventory of 6-bed units.
For those seeking affordable accommodation, Deira and Al Nahda have become popular choices for apartments, while Damac Hills 2 and Mirdif have attracted interest for villas. In the mid-tier segment, Jumeirah Village Circle (JVC) and Bur Dubai apartments have remained in high demand among tenants, whereas properties in Town Square and JVC have appealed to those in search of villas. In the luxury category, Dubai Marina and Business Bay have maintained their popularity for apartment rentals, while Dubai Hills Estate and Al Barsha have been the desired destinations for high-end villa rentals.
No slowdown
Dubai property market rally continued in the first half of 2024, with prices rising in most areas, defying speculations about the slowdown in the market.
Industry executives suggest strong demand was witnessed across affordable, high-end and mid-end categories with villa prices increasing over 41 per cent due to heightened local and foreign demand for affordable homes in the emirate.
According to Allsopp & Allsopp’s latest H1 report, data from the Dubai Land Department showed the total sales value in the first half reached Dh190.4 billion, a significant 38 per cent increase compared to the same period in 2023.
Despite the three-and-a-half-year rally, prices remain highly affordable compared to other luxury real estate destinations worldwide, making it an attractive option for new and institutional investors.
Real estate platform Bayut said there was a noticeable increase in average sales transaction prices for apartments, varying from 12 per cent to 40 per cent in the mid-tier property segment, with the most significant growth observed in Jumeirah Lake Towers (JLT). Similarly, sought-after areas featuring mid-tier villas have observed increases in average transaction sales prices ranging from 4 per cent to 23 per cent. While most areas in the luxury property segment also consistently recorded increases in transactional prices, ranging from 5 per cent to 24 per cent.
In addition to affordable prices, investors are also attracted towards the high rental yields to invest in the Dubai property market.
During the first half of 2024, Dubai Investments Park (DIP), Discovery Gardens, and Remraam offered rental yields of up to 11 per cent. For mid-tier apartments, Dubai Sports City, Dubai Silicon Oasis, and Motor City are particularly attractive, with rental yields surpassing 9 per cent. Additionally, luxury apartment locations such as Green Community,Al Sufouh, and Damac Hills have shown returns of up to 9 per cent, outpacing many global markets.
Source: khaleejtimes