Dubai Rental Market Sees Up to 15% Increase After RERA Index Update in 2024
Dubai Rental Market Sees Significant Increases
Since the Real Estate Regulatory Authority (RERA) Rental Index was updated earlier in March of this year, rents in Dubai have risen by as much as 15%. Most districts have seen increases in the range of 8 to 15 percent. This update has led to a higher number of renewals as tenants opt to stay in their current premises, avoiding the steeper costs associated with new leases.
Impact on Villa and Apartment Rents
In Q2 2024, rents rose by 19% year over year, marking a 64% increase from pre-Covid levels in Q1 2020. This steady rise over the past 14 quarters has driven many tenants to renew their contracts rather than move. Villa rents in Dubai increased by 21% in the affordable category, 12% in the mainstream category, and 1% in prime districts. Apartment rents followed a similar trend, with increases of 27%, 19%, and 14% in their respective categories.
Market Stabilization and Tenant Behavior
While secondary residential sales and villa rentals show signs of moderation, transaction volumes have plateaued. City-wide villa rents rose by 13% year-on-year, while apartment rents surged by 22%. The mid-market apartment districts experienced the steepest rent hikes, while prime districts saw more moderate increases. Tenants continue to favor renewals, with a 14% increase in renewals observed in Q2 2024.
Trends in the Rental Market
The prime market saw sharper increases earlier in the market cycle (2022-2023), which are now stabilizing. Meanwhile, mid-market and affordable districts are rebounding from historically lower bases. The rental market remains landlord-friendly, with rents increasing across the board. However, the pace of growth has slowed compared to last year. Household incomes are not keeping up with rising rents, leading to a contraction in disposable incomes.
Areas with the Highest Rent Increases
Jumeirah Village Circle villas saw the highest year-on-year increase at 40%, followed by Jumeirah Park (22%) and The Springs and The Meadows (14%). All apartment districts experienced higher year-on-year rental increases. Affordable districts saw the sharpest rises, with Discovery Gardens leading at 32%, followed by Dubai Sports City (28%) and Dubailand (24%).
Market Stabilization and Future Outlook
There has been some stabilization in the rental market. Nearly equal numbers of rental listings had unchanged prices in the first half of 2023 and 2024. However, 21% of rental listings saw a price decrease in the first half of 2024, up from 17% in the same period in 2023. City-wide sales prices have continued their upward trend for the 16th consecutive quarter, with a 21% year-on-year increase. Prime districts have seen moderation in sales price increases, while mainstream and affordable districts are experiencing steep increases, significantly impacting their affordability.
Off-Plan Sales and Future Trends
In most Dubai districts and off-plan projects, primary off-plan sales prices are higher than secondary off-plan prices. Although the percentage difference remains in the single digits, it suggests that sellers struggle to maintain original prices and are selling at slight discounts to clear inventory. This trend may intensify as more off-plan supply enters the market in the coming quarters.
