Dubai, known for its extravagant skyline and luxurious lifestyle, has recently witnessed a surge in its rental market that has sent apartment and villa rents to their highest levels in years. A new report from real estate consultancy CBRE, the Dubai Rental Report 2023, reveals a fascinating picture of Dubai’s rental landscape, highlighting the factors contributing to this remarkable trend.
A Remarkable Rise in Rents
The report showcases those average rents for apartments in Dubai reached their highest point since January 2017, while villa rents soared to an all-time high. Over the course of one year, from July 2022 to July 2023, average rents skyrocketed by a staggering 22 percent. This meteoric rise is all the more noteworthy as it signifies a significant departure from a prolonged period of
negative growth that had gripped the market from mid-2015 until late 2021.
Unprecedented Activity in Dubai’s Rental Market
CBRE’s data reveals an impressive surge in activity within Dubai’s rental market. According to the Dubai Land Department, the total number of tenancy contracts registered in the year to July 2023 reached an astounding 325,727. This marks a 43.5 percent increase compared to the same period in 2019, showcasing the market’s newfound vigor.
Changing Dynamics for Tenants and Landlords
In years past, tenants enjoyed numerous incentives from landlords in Dubai, such as rent-free months, discounts, and the flexibility to pay with four to six cheques. However, this report paints a different picture of today’s rental landscape. The supply-demand dynamics have shifted in favor of landlords, resulting in a reversal of this trend. New rental contracts for apartments now command an average premium of 20.1 percent compared to renewed contracts. This highlights a significant shift in power dynamics.
Tenant Retention Prevails
One intriguing aspect brought to light by the report is the tendency of most tenants to renew their existing leases rather than seek new accommodations. This behavior is largely driven by the desire to avoid the costs and hassles associated with relocating. As a result, the total number of new contracts registered has decreased by 12.6 percent, while renewed registrations have grown by a substantial 29 percent.
Prime Areas and Rental Regulations
It’s important to note that this trend is particularly prevalent in prime and core residential areas of Dubai. Here, tenants leverage the protective shield of rental regulations that cap annual rent increases at a maximum of 20 percent. However, achieving such high rent increases is considered rare in most cases, providing a sense of stability for tenants in these areas. As the market continues to evolve, it will be fascinating to watch how tenants and landlords navigate these uncharted waters and adapt to this new era of Dubai’s real estate landscape.