Dubai: Are rents dropping in some communities after double-digit hikes?
A few communities in Dubai have noticed a dip in rents, although rents in the city are rising at a slower pace relative to other periods.
Leaders in the real estate sector indicate the double digit increases in rentals for Dubai is over, attributing this to the market maturing. They state that there is now more stable and moderate increment in rentals.
Post pandemic, there has been a sharp increase in the population which is surging almost at a double digit growth rate, which has led to a rise in demand for real estate. This, alongside growing medical tourism for Dubai’s healthcare offerings is expected to spike economy bosting further fulfilling the expectations of real estate investors.
They also predict rentals plateaued in a certain region after a 4 year spike. Some markets like Jumeirah Village, with rapid new supply entering, are expected to drop post the older buildings following the start of the Smart Rental Index.
There are indications the rental market for the emirate is entering an adjustment period, according to comments made by chairman of Allsopp & Allsopp, Lewis Allsopp.
He adds that data collected showed average rental prices have dropped by 8% across apartments and townhouses voted for villa apartments on a month-to-month basis.
"More specifically, there has been an annual decline of 9% in apartment rentals. These figures indicate a possible market downturn which, if accurate, could lead to a balance between landlords and tenants."
Land Dubai is bound to change owing to some pertinent issues. The most important is the new smart rental index, which forces landlords to price competitively. The numerous new buildings also offer more rental competition. And with many renting looking to purchase homes, landlords must stay aggressive in pricing. All of these ingredients are aimed at balancing the rental market.
“Certain regions have already experienced a reduction in rents in comparison to their peak, with some areas projected to be lower in 2025 than in 2024. Nad Al Sheba and The Villa villa communities witnessed an overall reduction of 7-9% in the last year,” said Rupert Simmonds, leasing director for Betterhomes.
He went on to say that the remaining supply which is expected to be very high will be located in regions starting around 2025 and carrying over into 2026.
“While some rent prices have leveled off or dropped, others continue to increase. Core areas like Palm Jumeirah, Downtown Dubai, and Dubai Hills Estate have stayed constant or even risen because of strong demand and a low supply of luxury properties. On the other hand, mid-tier and affordable communities such as Jumeirah Village Circle (JVC), Dubai Sports City, and Discovery Gardens are showing early signs of stabilization,” he remarked.
As per Simmonds, luxury properties in key locations like Palm Jumeirah and Dubai Marina are expected to remain unaffected much due to limited supply alongside an influx of high net worth individuals (HNWI) and ultra-high net worth individuals (UHNWI) relocating to Dubai.
Increasing rivalry between landlords
Allsopp noted that the persistent trend in increasing rental prices has shifted many tenants to home ownership, with the Dubai Land Department recording a 30 percent month-over-month decline in rental renewals.
"This is driving some landlords to reconsider their rental rates,” he stated. “Moreover, the Smart Rental Index is also likely going to drive down rents for older buildings who don’t meet modern standards and amenities for lease-level building improvements.””
Rupert Simmonds claimed that regions with a high new unit handover level, like Dubai Creek Harbour, Dubailand, and Mohammed Bin Rashid City, might face rent decreases.
“This is due to the fact that an increase in supply tends to result in downward pressure on rental prices. Rigid landlords may struggle with higher vacancies, increasing downward pressure on pricing. Landlords need to be more flexible on pricing in order to achieve the most occupancy and the least void periods because that is where a landlord suffers the largest loss,” said the director of leasing at Betterhomes.
This signifies no more double-digit rental upsurge. In the view of leasing manager at Huspy Real Estate, the period of double-digit surges are over.
While predicting some shifts in specific communities undergoing mass move-ins of new properties, he anticipates almost no decline throughout the city and expects rents in the surrounding regions to adjust downwards.
According to him, “The market is certainly maturing, with sharp spikes now being replaced by stable and slower shifts in rental pricing.” He reminds everyone, however, that Dubai’s key communities will most likely see no drop in rents.
"With that being said, it is possible that some areas or particular market segments may see some volatility, but I do not expect a citywide downturn. Because of Dubai’s strong market drivers such as surging population and stable economy,” Nairn reasons, “I do not foresee any significant declines in rent in the next few years, certainly not by 2025 or 2026.”
Nairn mentions that the creation of additional residential units is expected to enter the market, which could help balance the demand and supply, thus mitigating the pace at which rental rates rise.
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