Residential rents in Dubai are set to ease or even fall this year after soaring to record levels in 2022 on the back of strong demand and limited supply, according to new research.

Prices for flats and villas, which rose by 9 per cent and 12.8 per cent respectively, are also expected to moderate, with some declines possible in certain locations due to increased supply, real estate consultancy CBRE said in a report released on Thursday.

In 2021, rental costs across the residential community in Dubai soared by 26.9 per cent, the highest level on record.

This increase was led by the flat segment, whose rents jumped by 27.1 per cent, while villa rents rose by 24.9 per cent.

In the year ahead, we expect both average price and rental growth rates to remain positive, however, we expect growth rates to slow, with declines in certain newer neighbourhoods with strong supply pipelines, the report said.

As of December 2022, flats in Dubai are selling for AED 1,168 (US$318) per square foot, while villas are priced at AED 1,385 per square foot.

Last year's market also saw high occupancy rates, with the Dubai Land Department registering 540,758 Ejari contracts, an increase of 10.8% compared to 2021.

However, due to rising rents, many tenants are choosing to extend their existing contracts rather than explore new housing options.

According to CBRE's analysis, the number of new Ejari contracts fell by 7%, while the number of renewals increased by 33.8%.

This trend is likely to continue this year.