A growing number of tenants in Dubai are opting to renew their residential leases to avoid the additional costs associated with signing new contracts amid rising rentals, CBRE said in its latest Dubai Rental Report 2023.

Renewed lease registrations grew by 29% compared to 12.6% for new contracts, the report said, indicating tenants were less willing to relocate to trim lease acquisition costs, particularly in prime and core residential communities.

Further, the RERA rental regulations limit the permissible annual rental increase to a maximum of 20%, with the highest increase rare in most cases.

Average apartment rents in the emirate reached their highest levels since February 2017, CBRE said, adding rents continue to rise, as average rents increased by 22% in the year to July.

“The surge in demand has substantially changed the market dynamics in Dubai’s residential rental market,” Taimur Khan, Head of Research – MENA at CBRE in Dubai, said, adding new rental contracts are able to achieve significant premiums to renewed contracts.

The premium, however, is beginning to dissipate in the apartment segment of the market as affordability parameters are tested and renewals begin to catch up with market rents, he stated.

CBRE analysed close to 703,000 residential rental transactions between January 2018 and July 2023, split between apartments and villas, to determine recent new and existing lease trends.

Dubai Land Department data revealed that the total number of tenancy contracts reached 325,727 in the first seven months of 2023, up 43.5%  from 227,011 contracts registered in the same period in 2019.  

(Editing by Brinda Darasha; brinda.darasha@lseg.com)