Rents in Dubai are set to rise further in 2023, particularly in prime markets where demand outstrips supply, while rents in affordable areas are likely to grow moderately.
Rents in the emirate have been on a downward trend since 2014, but are beginning to recover after the pandemic as many foreign workers return as the job market recovers and high net worth individuals flow into the market.
David Abood, partner at real estate consultancy Core, expects rents to rise across the board in 2023.
"The prime market is expected to continue to witness higher rents as demand in this sector outpaces supply. we expect relatively modest rent increases in this market segment as most of the upcoming supply is handed over in affordable housing and mainstream flat areas," said Abood.
Ayman Youssef, vice-president at Coldwell Banker, sees the biggest rent increases next year for luxury villas in prime locations such as Emirates Hills and Palm Jumeirah.
"The main reason for this is the influx of wealthy immigrants from Russia and Ukraine, who are currently the main contributors to inflation in the property market, a trend we see indicated to rise in 2023 as well. On the other hand, there is also likely to be more demand for waterfront properties, skyline views and gated communities, which will subsequently lead to an increase in rents," Youssef said.
According to Richard Waind, group managing director of Betterhomes, there are signs that rents are now starting to level off, having increased by slightly less than two per cent in the past three months.
"With just under 30,000 new homes due to be delivered in 2023 and very few villa or townhouse communities, it's not surprising that well-located homes are experiencing the highest rental prices. I expect this to continue into 2023. The high renewal rate will exacerbate the lack of rental stock in traditional villa communities, putting further upward pressure on rents," he said.
Rents below 2014 levels
Despite the increase, real estate industry executives said rents are still below their 2014 peak.
"Rents have declined between 2014 and 2021, and while rents have increased in all communities over the past 24 months, they are still below their 2014 peaks. Flats, in particular, have a way to go before they return to their previous highs. In Dubai Marina, for example, the average rent is Dhs121,000, nine per cent below the 2014 peak, while JLT and Sports City are still 30 per cent and 40 per cent behind respectively," said Richard Waind.
Citing another example, he said the average rent in Arabian Ranches was currently Dh217,000, six per cent below its peak in 2014.
David Abood said some mid-market areas were still below their 2014 peaks, including villa areas such as Jumeirah Village Circle, Spa and The Meadows, and flat areas such as Discovery Gardens, Dubai Sports City, Jumeirah Village Circle and JLT.
"When comparing peak values in 2014 with 2022, it is important to note that there were over 200,000 fewer units on the market then than there are today, and almost 1.2 million fewer residents. As a result, current rental values reflect a more mature market with strong socio-economic factors underscoring the city's growth."
Real estate industry executives revealed that there are still many areas in both Old and New Dubai where rents are below their peak levels of 2014.
David Abood of Core said established areas such as Bur Dubai, Deira and freehold areas including International City, Liwan, Dubai Silicon Oasis, Discovery Gardens and Dubai Sports City were the most affordable flat areas in the emirate.
Ayman Youssef added that some of the most affordable areas in Dubai are International City, Dubai Silicon Oasis, IMPZ and Town Square.
