Tenants will continue to pay higher rents on new contracts in Dubai but a hike on renewals will be capped by Real Estate Regulatory Authority (Rera) despite the rising demand for apartments and villas in the second half of 2022, experts say.
Analysts and executives said rents continued to notch a double-digit jump in the first half as landlords increased prices in the face of greater demand and a lack of available inventory, especially in popular villa communities. They expect rental rates to remain elevated in the second half of the year, however, rental growth is expected to slow eventually.
Haider Tuaima, director and head of Real Estate Research at ValuStrat, said Dubai’s residential rents were on average 20 per cent higher than last year.
“This rise is only applicable to new rentals, as renewed contract amounts are capped by the Rera rental calculator,” Tuaima told Khaleej Times.
He said the current trend has already seen a slowdown in pace, particularly villa segment as apartments were up 4.2 per cent while villas rose 3.3 per cent on quarterly basis. This moderation in rental growth is expected to continue in second half,” he said.
Swapnil Pillai, associate director, Middle East Research at Savills, sees a positive trend for rental market as indicated in consultancy’s latest report, which said Dubai rents have grown apace, benefiting from the wider lifestyle trends seen in other markets, recording 5.3 per cent
“Outlook for prime residential rental growth remains positive as the type of units sought after by tenants continues to remain in short supply,” Pillai said.
“For those, who wish to experience a location or accommodation before making a long-term and often expensive commitment, renting continues to remain a practical though short-term solution. Large living and outdoor areas that are conducive to hybrid working patterns will continue to remain a key consideration,” he said.
HNWIs, investor relocation
Ata Shobeiry, chief executive of Zoom Property, said the rental market of Dubai has been on the rise with around 21 per cent and 22 per cent annual growth in apartments and villas, respectively, mainly due to the influx of HNWIs and investors who are making Dubai their primary residence.
“The emirate’s business-friendly policies are also contributing to this growth. The same trend is expected to remain prevalent in the second half of the year as well,” Shobeiry told Khaleej Times.
He said there will be increased demand for short-term rentals in particular due to the upcoming Fifa World Cup scheduled to take place in Qatar later this year.
Lack of villas
The real estate agency Betterhomes said in it’s latest report that the average lease for apartments and townhouses climbed by 29 per cent and 33 per cent, respectively, while the average lease for villas rose by 64 per cent due to lack of supply for villas as landlords continued to capitalise on the current momentum in sales, selling up and exiting the market.
“Thwarted by higher prices and tight supply, more and more renters have chosen to stay put, negotiating and extending their current lease with their landlords, rather than entering the competitive leasing space. As a result, leasing transactions at Betterhomes declined by 25 per cent and inquiries dropped by 17 per cent,” according to Betterhomes.
Popular areas for rent
In reply to a question, Shobeiry said Jumeirah, Emirates Hills, Downtown Dubai, Arabian Ranches, Business Bay, Dubai Marina, and Discovery Gardens remained the preferred choices for renters in first half.
Arjan, Besides that, the demand for rental properties in The Greens, Liwan, Living Legends, and Discovery Gardens also witnessed an increase, he said.
“I believe that these areas will also continue to dominate the rental market in second half of 2022 as well,” he said.
Elaborating the priorities of tenants when they look for rental properties, he said a lot of factors drive the rental market.
“I believe it varies from individual to individual. However, generally, people look for accessibility and the area covered. The configuration, nearest landmarks, and facilities are other common factors that are taken into account. And with more focus on spending quality of life, there’s been an increased demand for properties that come with the latest amenities,” he said.