The consultancy noted that a number of important and prestigious residential neighbourhoods are expected to see single-digit growth and that “affordability constraints are beginning to catch up.”

Average residential rents increased by 21.1% in May 2024, up from the 20.8% growth a month earlier. A 22.2% increase in average apartment rent and a 13.1% increase in average villa rent served as the foundation for the increase.

Rent for an apartment was AED 126,598 on average in May 2024, while the rent for a villa was AED 352,572 annually. Palm Jumeirah had the highest average annual rental prices for apartments and villas, at AED 272,867 and AED 272,867, respectively.

Additionally, the report stated that secondary communities are seeing significant yearly increases in rent as a result of higher rents in the emirate’s core and prime residential areas.

According to the report, secondary communities in the emirate are experiencing significant yearly rent increases as a result of higher rents in the central business district and desirable residential areas.

As for the rental registrations, they totalled 255,178 in the first five months, up 5.9% year over year, according to data from the Dubai Land Department. The growth in renewed rental registrations, which accounted for 12% of the increase, was offset by a 3% decline in newly registered contracts.

“We are seeing tenants choosing to renew in the same place, as the rate of rental growth in certain neighbourhoods has significantly weighed on affordability,” CBRE stated.

Meanwhile, Freehold villa developments in Dubai experienced phenomenal growth, surpassing the highest peak values recorded in 2014. A critical threshold in the local real estate market is demonstrated by the average valuation of freehold villas, which exceeded 10 million UAE dirhams (USD 2.72 million).

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Property experts anticipate the continued buoyancy for several reasons, such as the Emirati city’s expanding attraction as a haven for the wealthy, the increased appetite of investors, the influx of professionals, and the population growth.

As to their statement, rental prices would see continuous upward pressure if net migration to Dubai was higher than the rate of new home handovers.

More people choosing to own rather than rent their houses, together with the growing popularity of real estate as an appealing investment option, are two factors that could determine the direction of rents in 2024.

Ilnara Muzafyarova, head of Colife, a real estate management company, says that after a dramatic increase in rental prices by 23% annually in the first half of 2023 and a year-end prediction of almost 30%, the upward trend appears robust.

Muzafyarova projected that short-term rentals (up to six months) would increase by 20% from 2023, while long-term rentals (more than six months) would increase by 15%. The market’s natural expansion serves as a solid foundation for this and from mid-2022 to mid-2023, apartment prices increased by 15%.

S&P predicted in November 2023 that home prices would rise by 5.0% to 7.0% in 2024. According to Tatiana Leskova, associate director of corporate ratings at S&P, there isn’t any proof that Dubai’s property market is slowing down in 2024.

According to analysts at real estate consulting firm CBRE, during January 2020, rents in Dubai have grown by over 42%, while home prices have surged by about 33%. Analogously, villa rentals saw a rise in average rent of 19.2% in November 2023, reaching USD 88,400 annually.

Experts noted that the growing trend in rentals is a reflection of Dubai’s thriving real estate market, where property values are rising in tandem with the construction of new high-rise buildings and a surge in real estate transactions.

Colife, the owner of a one-bedroom apartment in Dubai Marina, had a significant rise in monthly income over the previous year of 21.2%, reaching USD 2,970.

According to Colife, owners should expect even larger returns in the neighbourhood of USD 3,415 per month in 2024.

Real estate analysts predict a steady demand for residential space in Dubai due to the city’s growing population and ongoing influx of international professionals.

The third quarter saw a steady reduction in the growth rate of the Dubai rental market, according to real estate consultancy Asteco. With rental increases for flats, villas, and workplaces of 3.0%, 2.0%, and 4.0% over the three months, there has been a noticeable slowdown. According to Asteco, the changes were 18%, 19%, and 29% annually, respectively.

According to Property Finder’s November research, demand is greatest for one-bedroom apartments. Searches for one-bedroom apartments accounted for about 36% of the population, compared to searches for two-bedroom flats (30%) and studio apartments (24%).

While 42% of those looking for villas or townhouses had three bedrooms in mind, while 35% wanted a larger property with four bedrooms. Some 66% of tenants chose furnished apartments, while 32% sought unfurnished. Of those looking for villas or townhouses, 51% found unfurnished listings and 48% found furnished ones.

The Dubai Statistical Centre estimates that as of July 2023, 3,604,030 people were living in Dubai, up from 3,515,264 in July 2022. The Development Master Plan for Dubai projects that by 2040, there will be 5.8 million people living in the city.

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The luxurious Anantara The Palm resort has a private beach that stretches 400 meters (1,312 feet), offers breathtaking views of the Arabian Sea and has almost 300 rooms and villas.

According to a report by Bloomberg, Hotel owner Seven Tides is currently in discussions for a potential sale in partnership with Grant Thornton LLP

However, the report notes that there is no certainty regarding the finalisation of the deal. These discussions took place against the backdrop of Dubai’s thriving tourism sector as the city was recognized as a safe haven during the pandemic.

With its appeal to wealthy expats and tourists, Dubai’s hotels have been able to maintain an average occupancy rate of about 83% throughout the year through March.

According to property consultant CBRE Group, the average daily price in the first quarter reportedly reached AED783.8 (USD 213.45), the report said.

“Beach properties’ performance improved very rapidly after the pandemic and that’s driving considerable interest in the few hotels available to investors,” Taimur Khan, CBRE’s head of research said, Construction Week reported.

He added that “this is an opportune time for asset owners to exit as valuations look attractive with the strongest market we’ve had in years.”

Khan said that very little supply is coming to the market even in the top segment as investors anticipate that visitor numbers in Dubai could continue to rise as they have not returned to 2019 levels.

“Also few sites remain where a developer is able to build a beachfront five-star hotel,” he added.

Meanwhile, Dubai received 14.36 million international overnight visitors in 2022, growing 97% Y-o-Y from the 7.28 million tourist arrivals in 2021, according to the latest data published by the city’s Department of Economy and Tourism (DET). This is considered an exceptional growth in visitation that enables the city to surpass global and regional tourism recovery levels.

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According to a new analysis by property portal Bayut.com, properties in these areas provide the most alluring return on investment (ROI) within the luxury and budget divisions.

Projections suggest that residential properties in Dubai Marina will have the best rental returns for luxury apartments at 7.04%. In comparison, apartments in International City will have the highest returns in the budget class at 9.22%.

For those looking for affordable villas, Jumeirah Village Circle will be worth considering because it produced the most alluring ROI of 6.9% in 2022.

According to Bayut, houses in the area have provided the “healthiest” rental yields of 6.95%, making DAMAC Hills a viable choice for those looking at buy-to-let villas.

Appealing Location

For many investors, purchasing rental homes has been a popular choice. The UAE is a desirable location for investment due to the nation’s comparatively cheap tax structure, attractive sales prices, high tenant demand, and high-quality infrastructure and way of life.

Rents for apartments and villas have increased significantly over the past year due to the high demand.

Asking rentals for apartments increased by 39% alone in Dubai Marina. Currently, the average rent in the region for a one-bedroom apartment is AED91,000 (USD 24,775); for a two-bedroom apartment, it’s AED140,000; and for a three-bedroom house, it’s AED207,000.

Dubai Marina has become one of the most sought-after areas for potential purchasers looking for luxury residences.

According to Bayut, other well-liked areas in Dubai include Downtown Dubai, Arabian Ranches, and Dubai Hills Estate.

“Tenants looking for luxury apartments in Dubai have continued to be attracted to the properties in Dubai Marina during 2022,” the property portal remarked.

Affordable Housing

The cost of renting a flat has dramatically increased in Jumeirah Village Circle, a desirable location for tenants in the lower income bracket, by 14% to 24% in 2022.

In the previous year, renters were required to pay, on average, about AED36,000 for a studio apartment, AED51,000 for a one-bedroom apartment, and AED 73, 000 for a two-bedroom apartment.

Three- and five-bed apartments in DAMAC Hills 2 now cost about AED63,000 and AED98,000, respectively, due to a 9% increase in rent. According to Bayut, annual rates for four-bed homes “became more affordable” by 5.3%, with an average of AED74,000 in 2022.

However, retail prices have also increased. According to Bayut’s estimates, sales prices for condos and villas in Dubai’s most prestigious neighbourhoods will rise by 2% to 24% in 2022.

According to transaction data issued by the Dubai Land Department, Bayut, the demand for real estate in Dubai has continued to increase.

The real estate market has “outperformed expectations over the last year, with record-breaking transactions, attractive new launches, and favourable investment opportunities,” Bayut added.

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As future rate hikes are executed and investors’ purchasing power is predicted to deteriorate, it is expected that mortgage transactions and project launches, in particular, will experience some declines in 2023 compared to 2022.

Positively, as developers finish off ongoing projects, sales prices and rental rates will continue to be “elevated,” and the market will continue to add to its supply stock.

According to Asteco’s estimate, which was made public recently, the number of apartments and villas being built in the emirate would increase by almost 47,700 in 2023, or 53.8% more than they did in 2022. Around 40,000 units will be apartments, with 7,700 residential villas making up the remaining supply.

The momentum is anticipated to weaken as the spending power of foreign investors is impacted by restrained global growth, according to Asteco. Nevertheless, new project launches will continue to occur in 2023.

HP Aengaar, CEO of Asteco, stated in the report, “with more but smaller interest rate hikes expected in 2023, we anticipate a drop in mortgage transactions.”

Foreign Investment

Asteco said that due to the UAE’s image as a haven, progressive business reforms, and visa-related measures, the country would continue to witness “strong inward investment” in the real estate sector.

Although we expect the euphoria to fade and activity to reduce in the aftermath of global turbulence, from which the UAE is ultimately not immune, Asteco predicted that this would positively affect the real estate market.

The consulting company added that the emirate and the rest of the UAE have shown “impressive levels” of grit in the wake of the COVID outbreak in 2022.

It claimed that increased oil prices, a rebound in trade, and economic growth had caused inbound investment to soar significantly and transactions to reach new highs.

Thirty-one thousand residences, including 27,000 flats and 4,000 villas, were delivered in Dubai in 2022. In addition to being considered, the number of units that came online in the same timeframe was “impressive given the global economic challenges and supply-chain disruptions,” according to Asteco.

As average rental rates in the apartment and villa segments kept rising, project launches in the emirate also picked up speed toward the end of 2022. According to Asteco, rental rates for flats and offices increased by 19%, while those for villas saw a 23% yearly surge.

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As per CBRE’s “Dubai Residential Market Snapshot, December 2022”, some 81,919 residential transactions were reported in the year to date through November 2022, breaking the previous record highs set during the same period in 2009.

The average price rose by 9.5% during the year ending in November 2022. The average cost of an apartment increased by 9.0%, while the villa price hiked by 12.7%.

As per CBRE, the average price of a Dubai apartment was AED 1,161 per square foot, while the average cost of a villa was AED 1,374 per square foot.

The apartment and villa prices are however, still 22.0% and 4.9% lesser than the 2014 highs.

Head of Research at Mena, Taimur Khan, said, “Activity levels in Dubai’s residential market have reached record levels in the year-to-date to November with total transactions volume reaching 81,919, surpassing record highs of full year 2009, when transaction numbers totaled 81,182.”

“The average price of flats and villas increased by 9.0% and 12.7%, respectively, in the 12 months leading up to November 2022 thanks to this high level of activity. However, we are observing a decrease in the rate of average price growth, notably in the villa market, and in the near future, we anticipate the apartment market to follow suit,” Taimur Khan added.

He continued, “That being said, certain prime markets will continue to record strong growth rates.”

As per Khan, Jumeirah had the highest sales rate per square foot in the apartment market at AED 2,310, while Palm Jumeirah had the highest sales rate per square foot in the villa market at AED 3,802.

In the year leading up to November, average asking rentals increased by 27.3%, with average apartment rents rising by 27.6% and average villa rents rising by 25.4%, respectively.

Taimur Khan emphasized that typical rents in the rental sector rose at rates very close to records.

“In reaction, tenants appear more likely to extend their current leases. As a result, the number of new contracts registered year over year ending in November 2022 decreased by 5.8%, while renewals grew by 33.8%, according to Ejari statistics, which illustrates this,” Taimur Khan remarked.

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