According to Savills, the property consultancy, Dubai had one of the highest rates of rental growth among leading global cities during the first half of 2021. Miami and Moscow are the only two cities to see even higher gains on their prime properties.
According to the report’s findings, the average increase in demand across the cities is just 0.5% and the global demand has declined by almost 2% due to travel restrictions.
The rental rates in Dubai have been steadily declining over the last six years due to economic factors and an increase in new supply. COVID-19-related travel restrictions and the economic impact of the pandemic caused a 12 percent decline in rents in Dubai in 2020. According to Savills’ World Cities Prime Index Report, Dubai appears to be reaching a turning point.
A 20 percent increase in rents across certain villa communities drove up prime rental rates by 5 percent in the first half of 2021. “Rental markets are likely to remain stable for the rest of 2021,” said Swapnil Pillai, Associate Director for Research at Savills Middle East. “Travel restrictions remain in place between key source markets, causing rental prices to recover more slowly than capital values.
“However, in the long run, prices are likely to gradually appreciate as economic activity gathers momentum and more job opportunities are created. The further easing up of travel restrictions will be a welcome catalyst for growth.”
Leaders and laggards
Top of the rental growth scale was Miami, Moscow, and Dubai. Comparatively to Hong Kong or New York, each of these markets saw a spike in demand for larger and more expensive units. The Miami rental market experienced an increase in demand due to domestic migration, leading to a shortage of single-family homes. The market continues to produce new projects, but they have not been able to meet the demand for prime rental properties in the city.
Over the past half-year, Moscow housing demand has been comparable to the pre-crisis levels seen at the end of 2019 as Russians returned to their city. Following a decline in the second half of 2020, rentals for prime and ultra-prime properties are increasing again – especially for large apartments with outdoor space in key areas of the city.
Other cities that are experiencing a negative rental price growth include Kuala Lumpur, Hong Kong, and New York. In the last six months, rental rates have fallen in these cities due to persistent travel restrictions.