According to a new report, the average rent for Dubai’s apartments has climbed to the highest levels recorded since January 2017 and the rents for villas had risen to their highest levels on record.
CBRE, the real estate consultancy, published its Dubai Rental Report 2023 in which it said that rents were still continuing to grow.
The rent
It said that in the year to July 2023, there had been a 22% increase in average rents, even though this rate had been moderating throughout the year.
In 2023, the average rent for apartments is Dh95.5 per square feet, while it had been Dh95.7 back in 2017. As for villas, the average rent had reached Dh91.3 square feet.
The head of Research, MENA at CBRE,TaimurKhan, said that this is the highest value to be recorded in terms of villa rent.
CBRE said that there had been a significant increase in rents and activity in the rental market in Dubai in the last two years.
This had put an end to the negative-growth cycle that had started back in 2015 and had continued until 2021.
The Dubai Land Department revealed data which showed that the total number of tenancy contracts in the year to date July 2023 had risen to 325,727.
This was an increase of 43.5% from 2019 when the number of contracts registered had been around 227,011.
The past
There has been a decrease in the incentives that landlords provide for attracting existing and new tenants.
Four years ago, it was the norm for a 12-month contract to have a rent-free month, four to six checks for payment, along with discounts. But, the situation has now changed.
The consultancy said that the residential market in Dubai had seen supply exceed demand for a substantial period of time and this was particularly true for the apartment market.
Therefore, the market had been in favor of the tenants and landlords had provided a number of incentives.
Average discounts of 5% had been granted on new rental contracts in the apartment segment between January 2018 and July 2021, as compared to renewal contracts.
The changes
Now, the trend has reversed due to the significant increase in demand, as new rental rates have surpassed the average rates of renewed registrations.
Most tenants have opted to renew their residential leases because they do not want to deal with the cost of relocation.
There was a 12.6% decline in the number of new contracts registered, while there was a rise of 29% in the number of renewed registrations.
This is especially applicable in core and prime residential areas because tenants want to take advantage of the protection that rental regulations can offer.
These regulations are aimed at limiting the annual increase in rent, which cannot be more than 20%. The market dynamics have changed substantially in Dubai’s residential market due to the rise in demand.
Taimur Khan said that it was now a landlord-favored market and new rental contracts are achieving significant premiums, as compared to renewal contracts.
