Dubai’s real estate market is witnessing a significant increase in rents, with rates going up by as much as 15% since the Real Estate Regulatory Authority (Rera) Rental Index was updated earlier this year. This update, reflecting rental increases, has led to a higher number of renewals compared to new leases as tenants prefer to stay in their existing premises to avoid the higher costs associated with new leases. Rents in Dubai are now 64% higher than the pre-Covid-19 levels of Q1 2020, with a year-on-year increase of 19% in Q2 2024, resulting in more tenants opting to renew their contracts.
The increase in rents has been particularly noticeable in the villa segment, with rents in the affordable category rising by 21%, mainstream by 12%, and prime districts by 1%. In the apartment segment, rents for the three categories increased by 27%, 19%, and 14%, respectively, during the second quarter of 2024. However, there are signs of moderation in villa rentals and secondary residential sales, with transaction volumes plateauing in these segments. Despite the overall increase in rents, tenants are still choosing to renew their contracts, with renewals seeing a 14% increase in the second quarter of 2024.
Prathyusha Gurrapu, head of research and consulting at Cushman & Wakefield Core, noted that the mid-market and affordable districts are recovering from historically lower bases, while the prime market experienced sharper increases earlier in the market cycle over 2022-2023, which are now stabilizing. The rental market remains landlord-friendly, with rents increasing across the board, although the pace of growth has slowed compared to previous years. Household incomes are not keeping pace with rising rents, resulting in a contraction of disposable incomes for tenants.
Villas in Jumeirah Village Circle saw the highest year-on-year increase by 40%, followed by Jumeirah Park at 22% and The Springs and The Meadows at 14%. For apartments, all districts experienced higher year-on-year rental increases, with the affordable districts seeing the sharpest increases. Discovery Gardens saw a 32% increase, Dubai Sports City at 28%, and Dubailand at 24%. The rental market has shown some level of stabilization, with the number of rental listings with no change in the listed price being nearly identical between the first half of 2023 and the first half of 2024.
City-wide sales prices in Dubai continued their upward trajectory for the 16th consecutive quarter with a 21% year-on-year increase, according to Cushman & Wakefield Core. While the prime districts marked relative moderation in sales price increases, mainstream and affordable districts are witnessing steep increases, affecting affordability. Primary off-plan sales prices are higher than secondary off-plan prices across most Dubai districts and projects, suggesting sellers are struggling to match original prices and are selling slightly below market value to exit. This trend is expected to grow with more off-plan supply entering the market in the coming quarters.
