Dubai's Rental Market Activity in Q1 2023 Highlights City's Desirability Amongst Residents
Rental prices in Dubai continued rising over the first three months of 2023, with a 13.04% increase year-on-year, according to data released by high-end brokerage LuxuryProperty.com in their latest market report. This has led to a drop in transactional activity, but that’s primarily because of a decrease in new contracts. Renewals have grown massively, by over 44% during this period, which goes to show how unwilling residents are to move.
There are a couple of reasons for this - the most obvious is the increase in rental pricing. It makes much more financial sense to renew current rental contracts where the renewal price is capped by the RERA Rental Index - Dubai’s governing body for real estate transactions - than it is to find a new home where the rent is determined by the landlord. But more than that, the surge in renewals shows us that Dubai is increasingly being seen as a long-term home by residents.
As Dubai has grown more cosmopolitan over the years and introduced new initiatives that are aimed at making it easier than ever to live and work in the city, the life cycle of tenants has grown longer. Dubai was once seen as a temporary stop where (mostly single) expats would stay for a handful of years, and were happy to move around as needed for that timeframe. But in the current landscape, more families are coming into Dubai and looking to lay down a foundation for the long-term. Tenants are no longer looking for a property that can be lived in for a set contract period - they are very much on the lookout for a home where they can stay for several years. It’s a positive sign for investors, who can expect to rent out their properties for longer periods with a guaranteed rental income.
Another key trend is that tenants, particularly those who are at the low end of the prime market, are making the jump to becoming homeowners. With rents rising at the pace that they are, a monthly mortgage payment (even with high interest rates) is comparable to a monthly rental payment, but with a sense of permanence at the end of it.
Ultimately, Dubai’s rental market is rife with opportunity for the knowledgeable investor. Apartments, which have made a comeback in a post-Covid landscape, offer attractive yields, but villas currently offer the highest return on investment.
The full report can be found HERE.