More tenants in Dubai are renewing their residential leases as rents continue to rise, with a 14 percent annual increase in the number of renewals in the second quarter of this year, according to a new report.
City-wide rents rose for the 14th consecutive quarter, property consultancy Cushman and Wakefield Core found.
Apartment rents are up by 22 percent compared to the same period last year, its report said, and villa rents rose by 13 percent year-on-year.
“Household incomes are not keeping pace with rising rents, which is further contracting disposable incomes,” Prathyusha Gurrapu, head of research and consulting at Cushman and Wakefield Core, said.
“Similar to the trends seen in the sales market, rents in the mid-market apartment districts, such as Discovery Gardens, Dubai Sports City and Dubailand, saw the steepest rise, whereas prime districts saw lower levels of increase.”
This week, Abu Dhabi launched the emirate’s first residential rental index, aimed at providing indicative rental values for tenants and landlords in different areas of the capital. The Rental Index is available online at the Abu Dhabi Real Estate Centre’s website www.adrec.gov.ae.
Rents continue to rise in Abu Dhabi. Apartment rents increased by 2 percent annually in Abu Dhabi during the second quarter, while villa rents jumped 5 percent, according to the latest report from Asteco.
Dubai's Real Estate Regulatory Authority updated its rent calculator earlier this year. The Rera calculator, which was recalibrated on March 1 to become more representative of open-market pricing, is revised periodically.
Residential sales prices in Dubai continued their upward trajectory for the 16th consecutive quarter with a 21 percent year-on-year increase, according to the Cushman and Wakefield Core report. However, it said, prime districts saw a relative moderation in sales price increases, while mainstream and affordable districts are witnessing steep increases that are impacting their affordability.
The study found that Dubai remained a strong global ultra-prime market, with more than 305 residential properties sold for above Dh20 million in the second quarter, a 12 percent annual increase. However, there has been a marked slowdown in off-plan transactions over the last two quarters.
“This is mainly due to the lower off-plan inventory available in the market for these ticket sizes. That said, secondary market ultra-prime transactions have retained their steady activity levels with 135 transactions,” Ms Gurrapu said.
During the second quarter, only 5,391 units were delivered compared to more than 8,350 in the preceding quarter, the report said.
A total of 24,300 residential units are anticipated over the remainder of the year, bringing the annual total to nearly 39,000 units, which is similar to 2023 and in line with market demand.
“Growing from a high base, new project launch volumes continue to see record numbers with a 42 percent annual increase, as demand and absorption remain buoyant,” Ms Gurrapu said.
“We have also seen developers with large landbanks initiating projects and smaller private developers aggressively acquiring land, which continues to be a challenge to source.”
Until the end of 2021, the differential between off-plan transactions and secondary market transactions was limited. However, over the last two to three years, off-plan transactions have sharply increased, underpinned by the rise in new project launches.
Ms Gurrapu said that while secondary market transactions recorded a moderate growth of 5 percent, off-plan transactions saw a substantial spike of 61 percent.
In the second quarter, off-plan transactions accounted for more than double the number of secondary market transactions, indicating that the off-plan market has a higher share of investors compared to end users, she added.
“Primary off-plan sales prices [inventory sold by developers] are higher than secondary off-plan prices [resales by individuals] across most Dubai districts and off-plan projects,” the report said.
“Although the percentage difference is still in single digits, it suggests that sellers are struggling to match original prices and selling slightly below market value to exit.”
Other indicators of market stabilisation include a higher number of sales listings with no change in prices in the first half of 2024, while a much lower number of listings saw prices increase compared to the same period, according to Cushman and Wakefield Core.