Tenants continue to pay higher rents on new contracts in Dubai, but experts say the rise in renewals will be capped by the property regulator (Rera) despite rising demand for apartments and villas in the second half of 2022.
Analysts and executives said rents continued to notch a double-digit jump in the first half as landlords increased prices in the face of greater demand and a lack of available inventory, especially in popular villa communities. They expect rental rates to remain elevated in the second half of the year, however, rental growth is expected to slow eventually.
Haider Tuaima, director and head of Real Estate Research at ValuStrat, said Dubai’s residential rents were on average 20 percent higher than last year.
“This rise is only applicable to new rentals, as renewed contract amounts are capped by the Rera rental calculator,” Tuaima told Khaleej Times.
He said the current trend has already seen a slowdown in pace, particularly villa segment as apartments were up 4.2 percent while villas rose 3.3 percent on a quarterly basis. This moderation in rental growth is expected to continue in second half,” he said.
Swapnil Pillai, associate director, Middle East Research at Savills, sees a positive trend for the rental market as indicated in the consultancy’s latest report, which said Dubai rents have grown apace, benefiting from the wider lifestyle trends seen in other markets, recording 5.3 percent.
“Outlook for prime residential rental growth remains positive as the type of units sought after by tenants continues to remain in short supply,” Pillai said.
“For those, who wish to experience a location or accommodation before making a long-term and often expensive commitment, renting continues to remain a practical though short-term solution. Large living and outdoor areas that are conducive to hybrid working patterns will continue to remain a key consideration,” he said.
Ata Shobeiry, chief executive of Zoom Property, said the rental market of Dubai has been on the rise with around 21 percent and 22 per cent annual growth in apartments and villas, respectively, mainly due to the influx of HNWIs and investors who are making Dubai their primary residence.
“The emirate’s business-friendly policies are also contributing to this growth. The same trend is expected to remain prevalent in the second half of the year as well,” Shobeiry told Khaleej Times.
He said there will be increased demand for short-term rentals in particular due to the upcoming Fifa World Cup scheduled to take place in Qatar later this year.
The real estate agency Betterhomes said in its latest report that the average lease for apartments and townhouses climbed by 29 per cent and 33 per cent, respectively, while the average lease for villas rose by 64 per cent due to lack of supply for villas as landlords continued to capitalise on the current momentum in sales, selling up and exiting the market.
“Thwarted by higher prices and tight supply, more and more renters have chosen to stay put, negotiating and extending their current lease with their landlords, rather than entering the competitive leasing space. As a result, leasing transactions at Betterhomes declined by 25 percent and inquiries dropped by 17 percent,” according to Betterhomes.
In reply to a question, Shobeiry said Jumeirah, Emirates Hills, Downtown Dubai, Arabian Ranches, Business Bay, Dubai Marina, and Discovery Gardens remained the preferred choices for renters in first half.
Arjan, Besides that, the demand for rental properties in The Greens, Liwan, Living Legends, and Discovery Gardens also witnessed an increase, he said.
“I believe that these areas will also continue to dominate the rental market in second half of 2022 as well,” he said.
Elaborating the priorities of tenants when they look for rental properties, he said a lot of factors drive the rental market.
“I think it varies from person to person. But in general, people want accessibility and coverage. Composition, nearby points of interest and facilities are other common factors to consider. Quality of life is becoming more important and there is a growing demand for properties with modern amenities,” he said.
