This consistent increase for the past 14 quarters has resulted in more tenants renewing their contracts
Rents in Dubai have increased up to 15 per cent since the Real Estate Regulatory Authority (Rera) Rental Index was updated earlier in March this year.
“The Rera rental index was updated earlier this year to reflect rental increases, with most districts seeing increases in the range of 8 to 15 per cent. We have seen a higher number of renewals compared to new leases as tenants look at renewing in existing premises since new leases continue to be higher than renewals,” said Prathyusha Gurrapu, head of research and consulting at Cushman & Wakefield Core.
Rents, which are 64 per cent higher than the pre-Covid-19 quarter of Q1 2020, increased by 19 per cent in Q2 2024 year-on-year. This consistent increase for the past 14 quarters has resulted in more tenants renewing their contracts.
Villa rents in Dubai increased 21 per cent in the affordable category, 12 per cent in mainstream and 1 per cent in prime districts, while rents for the three categories in the apartment segment rose 27 per cent, 19 per cent and 14 per cent, respectively, during the second quarter of 2024. This is according to a report released by Cushman & Wakefield Core on Thursday.
However, signs of moderation are seen in villa rentals and secondary residential sales with transaction volumes plateauing.
“We saw a relative stabilisation in city-wide villa rents, which have risen by 13 per cent year-on-year, whereas apartment rents are up by 22 per cent compared to the same period last year. We have seen a higher percentage of tenants continuing to renew, with the number of renewals in the second quarter of 2024 seeing a 14 per cent increase. Similar to the trends seen in the sales market, rents in the mid-market apartment districts saw the steepest rise in rents, whereas prime districts saw lower levels of increase,” said Prathyusha Gurrapu.
Gurrapu added that the mid-market and affordable districts are recovering from historically lower bases, whereas the prime market experienced sharper increases earlier in the market cycle over 2022-2023, which are now stabilising.
“The rental market continues to be landlord-friendly, with rents increasing across the board, though the pace of growth has slowed compared to last year… Household incomes are not keeping pace with rising rents, which is further contracting disposable incomes,” she added.
Villas in Jumeirah Village Circle saw the highest year-on-year increase by 40 per cent, followed by Jumeirah Park (22 per cent) and The Springs and The Meadows (14 per cent). However, all the apartment districts saw higher year-on-year rental increases, with the affordable districts experiencing the sharpest increases, including Discovery Gardens (32 per cent), followed by Dubai Sports City (28 per cent) and Dubailand (24 per cent),” she added.
The head of research and consulting at Cushman & Wakefield Core elaborated that the rental market showed some levels of stabilisation, as the number of rental listings that witnessed no change in the listed price was nearly identical during the first half of 2023 and the first half of 2024. In fact, she said nearly 21 per cent of rental listings in the first half of 2024 saw the listed price being decrease compared to 17 per cent in H1 2023.
According to Cushman and Wakefield Core, city-wide sales prices continued their upward trajectory for the 16th consecutive quarter with a 21 per cent year-on-year increase. “We have seen the prime districts mark relative moderation in sales price increases while mainstream and affordable districts are witnessing steep increases – albeit significantly impacting their affordability,” she added.
Primary off-plan sales prices are higher than secondary off-plan prices across most Dubai districts and off-plan projects. Although percentage difference is still in single digits, it suggests that sellers are struggling to match original prices and selling slightly below market value to exit. This trend is worth monitoring, as it may grow in the coming quarters with more off-plan supply entering the market, Gurappu added.
Source: Khaleejtimes
