According to assumptions made by specialists in the real estate sector, rents in Dubai are expected to begin to level down in the near future as a result of greater supply.
According to CBRE data, Dubai’s average rent increased year over year to 24.8% in August 2022 from 23.7% the previous month.
“The growth rate of rents, on a month-on-month basis, has slowed for three consecutive months now, indicating we may see the rental growth rate start to moderate in the not too distant future,” said Taimur Khan, head of research – Mena at CBRE in Dubai.
Average rentals increased by 24.8% from August 2021 to August 2022. Average villa rents rose by 24.2% during this time, while average apartment rents rose by 24.9%. According to Khan, the average yearly rent for an apartment was Dh87,774 and for a villa was Dh263,034.
The Palm Jumeirah neighborhood’s average rent of Dh222,870 and Al Barari’s average rent of Dh935,046 respectively had the highest yearly rates for apartments and villas.
According to Ata Shobeiry, CEO of Zoom Property, the rise in average home prices across all market sectors shows that the Dubai real estate market will continue its bullish trend into the second half of the year.
“While the average prices have still not reached the peak 2014 levels, the significant growth indicates that the market won’t be affected by global challenges and end the year on a very strong note,” he said.
According to Lahlou Meksaoui, a senior analyst at Moody’s Investor Service, due to considerable supply, particularly in Dubai, average rents will remain steady throughout the UAE in the upcoming 12 to 18 months. The Dubai Hills Mall, for instance, which has a gross leasable area (GLA) of around 2.0 million square feet, was completed by Emaar Properties in February.
“Tenant sales, which are a driver of retail landlords’ rental income, will remain exposed to weaker consumer confidence because of rising inflation.”
In the office sector, Moody’s expects moderate average rent increases for DIFC Investments and Aldar Investment Properties because of good demand for Grade A office buildings and limited supply in this segment. According to JLL, the most recently completed office buildings are Grade B developments which are less in demand. “Changing employee preferences as a result of the pandemic have triggered higher inquiries for flexible space options and better quality office buildings. As a result, we expect high-quality office properties to report lower average vacancy rates than the rest of the market,” said Meksaoui.
In the upcoming 12 to 18 months, Moody’s anticipates that average residential prices would stabilize or gradually soften, restrained by the ongoing supply of new homes. According to Jones Lang LaSalle (JLL), a real estate investment and advisory firm, 58,000 new residential units will become available in Dubai this year, making up around 9.0 percent of the current supply.
“By contrast, there will be 9,000 units completed in 2022 in Abu Dhabi, or about 3.0 per cent of existing stock. We believe the future supply will be easier to absorb in Abu Dhabi because it has more balanced supply and demand dynamics compared to Dubai,” Moody’s said in a report.
According to CBRE data, there were 9,257 total transactions in Dubai’s residential market in August, up 70.5% from the same month last year. Off-plan and secondary market sales increased by 68.5 percent and 72.4 percent, respectively, within the same time frame. The overall number of transactions from the start of the year till August 2022 reached 55,108, the highest number since 2009.
In the 12 months leading up to August 2022, average prices increased by 8.8%, with average apartment prices increasing by 7.7% and average villa prices increasing by 15.8%.
Average villa prices in Dubai were Dh1,339 per square foot, and average apartment prices were Dh1,120 per square foot. According to a CBRE analysis, these average rates are still below the top of 2014, when apartments and villas are respectively 24.7% and 7.3% below this peak.
Jumeirah recorded the highest average sales rate per square foot in the market segment for flats at Dh2,152, while Palm Jumeirah recorded the highest average sales rate per square foot in the market segment for villas at Dh3,588.
“August’s total volumes of transactions in Dubai’s residential market reached 9,257, the fifth highest monthly total ever recorded. Transactional activity in the sector is continuing to defy, both, a challenging global economic backdrop and what is usually is a more subdued period for transactional activity. With mortgage rates, both promotional and post-promotion, increasing, we have seen average price growth slow to 8.8 per cent in the year to August 2022, down from 9.9 percent a month earlier,” said Khan.