In the third quarter of 2023, rental prices in Dubai continued their upward trajectory, spanning both the affordable and luxury property segments. This surge is attributed to the emirate’s growing population and expanding local economy, with an influx of foreign businesses and increased employment opportunities.
Dubai’s population as of Sunday stood at 3,636,610, compared to 3,550,400 at the end of 2022, representing an increase of 86,210. The active job market in Dubai has also attracted a substantial number of job seekers.
According to property portal Bayut’s third-quarter data, affordable apartment rentals in popular areas witnessed increases of up to 11%, while luxury apartment rentals rose by as much as 13%. Affordable villas experienced price hikes ranging from 3% to 16%, while luxury villa rentals increased by up to 21%.
For affordable rentals, Jumeirah Village Circle (JVC) and Al Nahda have been sought-after areas for apartments, while those in search of villas have primarily focused on Damac Hills 2 and Mirdif. In the luxury segment, Dubai Marina and Business Bay remained popular choices for apartment rentals, while Dubai Hills Estate and Arabian Ranches 3 were in demand for high-end villas.
Haider Ali Khan, CEO of Bayut and head of Dubizzle Group Mena, emphasized that Dubai’s rental market shows no signs of slowing down, particularly in the context of the emirate’s impressive growth across sectors such as tourism, real estate, and energy.
Over the past two years, Dubai’s rental market has rebounded, ending the cycle of negative growth that began in mid-2015 and continued until late 2021. Data from the Dubai Land Department revealed that in the year to date through July 2023, the total number of tenancy contracts registered reached 325,727, marking a 43.5% increase compared to 2019, when 227,011 contracts were registered during the same period.
Taimur Khan, head of research at CBRE, noted that the local rental market is fragmented, with a 12.6% drop in new contract registrations and a 29% increase in renewed registrations. This indicates that tenants are less willing to relocate, as they are not prepared or able to pay the higher rates evident in new leases, particularly in prime and core residential areas.
CBRE expects that premiums for new rental contracts in the apartment segment have peaked, and these premiums have been decreasing since January 2023. However, in the villa segment, which faces undersupply, this level of premium is unlikely to decrease significantly in the near term. In the long term, as new rental levels stabilize, these premiums are expected to shrink as new renewals adjust to the stabilized market rate.