Dubai rents at near-historic highs; may start to moderate

Rents in Dubai continue to register near record growth and may start to moderate subsequent to increased supply in the near future, property market experts forecast.

Average rents in Dubai surged year-on-year to 24.8 per cent in August 2022, up from 23.7 per cent a month earlier, according to CBRE data.

“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.

In the year to August 2022, average rentals rose by 24.8 per cent. Over this period, average apartment rents increased by 24.9 per cent and average villa rents by 24.2 per cent. As of August 2022, the average annual apartment and villa rents reached Dh87,774 and Dh263,034, respectively, said Khan.

The highest annual apartment and villa rents were respectively seen in Palm Jumeirah, where average rents reached Dh222,870, and in Al Barari, where average rents reached Dh935,046.

Ata Shobeiry, chief executive of Zoom Property, said the increase in average property prices across all segments depicts the Dubai property market continuing its golden run during 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.

Lahlou Meksaoui, a senior analyst at Moody’s Investor Service, said average rents across the UAE will be stable in the next 12-18 months because of high supply, especially in Dubai. For instance, in February, Emaar Properties delivered the Dubai Hills Mall which has a gross leasable area (GLA) of about 2.0 million square feet.

“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 recent completed office buildings are Grade B developments which are less in demand. “Changing employee preferences as a result of the pandemic have triggered higher enquiries 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.

— issacjohn@khaleejtimes.com