Dubai rent prices are not expected to fall any time soon, experts told Arabian Business as more residents look to buy property in a significant shift for the once quite transient city.
Rents have increased to 2016 market peak levels in the emirate, resulting in tenants facing increasing pressure on their budgets. This has forced many to seek out cheaper alternatives such as moving out to less central areas or to buy property instead of renting at such high prices.
“I don’t think we’re going to see rents decrease in the near future,” Taimur Khan, Head of Research – MENA at CBRE, told Arabian Business.
“Rents are still increasing. In terms of how quickly they are increasing, that has slowed down and it has been slowing down for about five months. We are seeing a lot of levelling out happening, for sure.”
Top-end market segments in prime neighborhoods like Palm Jumeirah and Downtown Dubai saw rents increase first, but have since become slightly more stable compared to the pace of rent increases in other areas.
“What we are seeing is that tenants are choosing to stay in their current place, even though they might want to move. Something they might be looking at is the differential rent between new rents and their existing rent – the level is so significant that that’s actually forcing landlords to reduce their price expectations,” Khan explained.
However, for the more affordable mid-market segment, rents will continue to rise, he said, expecting it to eventually stabilise after a few more months.
“For five, six years, we had rents decreasing. We’re sort of back at where we were, late-2016 levels. I think there is a limit to how high they can go but I don’t see them going down on average in the immediate future.”
This might be “bad news” for renters, he said. This means that people will need to more actively consider where they are located whereas in previous years, “they may have been fortunate enough to live in some very core locations” when the market was at a more affordable level, such as in 2020 and 2021.
“[But] now, what was historically classed as more affordable are those areas becoming very popular because of this. And you know, that will encourage more development in these areas, from investors as well. So there’s negatives and positives.”
Apartment rents rose by 19 percent and villas by 25.5 percent during the second quarter this year, according to a report released by Property Finder last month.
What will it take for rent prices to drop in Dubai?
“The increased demand, along with Emirates’ global appeal, has significantly influenced rents. It’s a classic case of demand outpacing supply in key residential areas,” Callum Radford, Sales Manager, Residential Brokerage, Colliers in the MENA region, told Arabian Business.
He believes that rental prices are “unlikely” to dip any time soon, and said that there may be a few scenarios that could bring a “correction” to the rental market.
The introduction or handing over of new residential projects could increase the supply to meet the heightened demand for properties, and in turn, reduce rental prices.
“Another could be external economic factors or global shifts that could potentially divert the international attention Dubai currently enjoys,” he explained.
Khan said that for rents to drop, a “very significant prolonged slowdown in the economy” would need to take place.
With there being low to no stock availability in certain areas, rents will inevitably rise, he explained, echoing Radford’s sentiment. He added that as more residents choose to buy instead of rent, this only negatively impacts the stock issue.
“The city is becoming a lot less transient,” Khan said.
As more residents adopt a long-term perspective on living in Dubai, homeownership will likely increase. This is in addition to favourable mortgages and policies by Dubai Land Department, as well as more visa options.
“While current rental trends in Dubai reflect its growing appeal and robust economic recovery, it’s essential for both tenants and landlords to remain informed and flexible. Market dynamics can shift, and as they do, opportunities for both parties can emerge in unexpected places,” said Radford.
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