According to Prathyusha Gurrapu, Director of Research and Consulting at Core, overall rental levels in Dubai have increased by an average of 8-12%, with lower rent increases observed in peripheral and suburban areas. As the gap between renewal and new lease rents widens, the rental market is gradually displaying a trend of polarization.

Gurrapu further explained that due to the continuous increase in rents, more tenants are considering transitioning to property ownership and becoming end-users. In Dubai's rental market, existing tenants are more inclined to stay in their current residences as they can benefit from relatively lower renewal rents, with rent increases regulated under Rera (Real Estate Regulatory Agency) supervision. Meanwhile, new tenants are required to pay higher fees than nearby buildings, resulting in a clear two-tiered rental market, with the gap between renewal and new lease rents continuously widening.

It is anticipated that in 2024, rents for new leases will continue to rise, especially in mature central locations such as the city center and Business Bay, where high occupancy rates will exert greater upward pressure on rents.

However, due to a higher number of deliveries in suburban areas, rental increases in newly delivered areas are expected to be relatively lower. Additionally, Gurrapu noted that despite high sales prices and rates, some tenants are transitioning to become end-user buyers to avoid frequent renewal negotiations or relocations.

Meanwhile, some landlords are utilizing Rera rental valuation certificates to increase rents, surpassing the Rera rental index. Core analysts stated that Dubai's apartment total yield reached 7.3%, the highest level in the past seven years, while the city's villa total rental yield decreased from 5.5% to 5.3%, attributed to the growth rate of sales prices surpassing that of rental prices.

Although residential rents continue to rise, the growth rate is slowing down. Rents increased by 19% year-on-year in 2023, compared to 27% in 2022. It is expected that in 2024, rents will increase by an average of 8%-12%, with the possibility of higher increases in central locations. However, rental increases in peripheral and suburban areas are expected to be relatively lower, leading to a growing gap between new lease and renewal rents citywide.

According to Core's "Dubai Annual Market Update" report, supply exceeded 39,400 units in 2023, the highest level since 2020. Plans for delivery of over 65,000 units are in place for 2024, but Core analysts estimate the actual delivery to be around 32,000 units, with 76% expected to be apartments and 24% villas. This highlights the supply-demand imbalance and two-tiered trend in Dubai's rental market.