Dubai’s residential rents are set to ease or even decline this year after surging to record levels in 2022 on the back of robust demand and limited supply, according to new research.
Prices of apartments and villas, which rose by 9% and 12.8%, respectively, are also expected to moderate, with certain locations likely to post some declines on increased supply, real estate consultancy CBRE said in its report released on Thursday.
Rental costs across Dubai’s residential communities surged by 26.9% in 2021, the highest level on record. The growth was led by the apartment segment, where rents jumped by 27.1%, while villa rents rose by 24.9%.
“In the year ahead, we expect that both the average rates of price and rental growth will remain positive, however, we expect the rates to moderate and in certain more nascent communities with strong supply pipelines, to decline,” the report said.
As of December 2022, apartments in Dubai were selling for AED 1,168 ($318) per square foot, while villa prices stood at AED 1,385 per square foot.
The market also saw higher occupancy rates last year, with the Dubai Land Department registering 540,758 Ejari contracts, up by 10.8% compared to 2021. However, due to rising rents, many tenants opted to extend their existing contracts rather than explore new housing options.
According to CBRE’s analysis, the number of new Ejari contracts dropped by 7%, while renewals increased by 33.8%. The trend is likely to continue this year.
“Given rising rental rates, we are seeing that tenants are more likely to renew in situ,” CBRE said.
Around 29,397 apartments and villas were handed over in Dubai last year. Jumeirah Village Circle, Damac Hills 2 and Dubai Hills estate accounted for a significant portion of the new supply, around 26.2%.
The supply is expected to increase, with an additional 70,957 residential units that are currently under construction scheduled for handover in 2023. More than a third (32.4%) of the upcoming supply is being developed in Meydan One, Business Bay and Downtown Dubai.
(Writing by Cleofe Maceda; editing by Seban Scaria)