First-time buyers in Dubai are moving quickly from the rental segment to the owners’ segment to escape continuously growing rents in the emirate, those new residents who are going to stay in the emirate for a longer period will help absorb new supply that is coming to the market.
Overall, the population in Dubai is on the rise and this is still driving rental transactions, especially taking into consideration the fact that in new areas majority of the newly constructed projects find their homes in the rental market.
In the first half of 2024, rents in Dubai rose as much as 31 percent because of the never-ending strong demand for properties, the upward trend caused a decrease of the existing supply of affordable and luxury units.
Analysts from the industry point out that the growth of rentals is most appealing in outskirts because residents and new residents who comprise the better part of customers in rental are moving to such areas because accommodation rates are relatively still higher as compared to upcoming outskirts.
The phenomenon of occupants renting their first one or two years in these condominiums before becoming the next batch of buyers looking to stay put due to business and lifestyle reasons, said Edward John, managing director of Etree Real Estate Company.
“New residents and the rental market as a whole assist in correcting a large market for newly constructed premises In Downtown Dubai three new buildings were completed in 2023 and there have been over 550 new rental contracts signed for these buildings in the first half of 2024 However the supply of new residential buildings is also distributed by other segments of the population so that it is not unique to young singles or bachelors” he further said.
Average rental rates remain significantly high across all but one of the communities; however, the number of transactions decreases in most of the communities, as stated by Edward.
Dubai’s secular trend where many renters buy homes because they anchor themselves for long-term in Dubai is being propped by high rental prices, cheap mortgages, relaxed visa requirements and population growth it added.
As pointed out by Lyons Such a trend will only be realized in 2025 and 2026 when rental supply is expected to increase However, 80 percent of these will be apartments Unlike houses these have the ability to contain lower number of cohorts hence the projected population growth needed to support the supply is often exaggerated.
“Based on the very robust transaction data at an Emirate-wide level, what is apparent is that Dubai is still being constructed, neighborhood by neighborhood”, he continued.
“Dubai’s super cycle of value and transaction volume growth is likely extend for the long-term” he furthered.
“While the global economy is slowing down and interest rates are on the rise globally, investors worldwide are seen shifting to wealth preservation assets We have seen Dubai actual estate market outstripping other markets in terms of price increase as well as demand sustenance even after the stability for 24 months,” said Haider Ali Khan, CE of Bayut, and head of Dubizzle Group Mena.
Allsopp & Allsopp being optimistic to the continues market growth, they said that over 50,000 people migrated to Dubai in the first half of 2024, the supply of new properties to expand throughout the market sector still exceeds the current supply entering the residential market which is a clear indication that the market will definitely maintain the current positive growth heading to the second half of 2024.
Average rent – H1= $3 285,000, increase in rent = 31%, from $2 470 000 to $3 285 000.
Citing property portal Bayut, it said that rents in Dubai had increased by between 4 per cent and 31 per cent in the first half of 2024.
Group ‘C’ apartments for middle income employment garnished their rent to up to 15% while the Group ‘A’ luxury apartments raised rent by as much as up to 7%. Although, certain units in Business Bay as well as Downtown Dubai observed a price decrease of less than 6%.
Now there has been a rise in price of budget villas by 12% and mid-level villas has a hike 15%. Luxury villa rentals have swelled by up to 27 per cent, with Damac Hills recording the peak 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.