13 October 2023, Money Control
After more than two years of soaring rents, there’s finally some good news for tenants in Dubai.
While rents continue to increase at eye-popping levels, the rate of the surge is finally moderating in some of the city’s most popular neighborhoods, according to CBRE Group Inc. Rents had climbed to record rates following an influx of newcomers to the Middle Eastern financial and business hub.
The average rental rate climbed 20.6% in the year through September, slightly lower than the 21.7% growth registered a month earlier, according to the real estate adviser. Over this period, the average leases for apartments and villas rose 20.7% and 20.1%, respectively.
In September, the average annual rent for a villa reached a record 322,750 dirhams ($87,870), and while those prices are likely to climb further due to limited supply, they’re not expected to rise as quickly as they have been, according to Taimur Khan, CBRE’s head of research. That’s mostly due to tenants dodging price increases by moving to the edge of the city or fighting eviction notices in court, he said.
“Despite demand remaining elevated, the rate of rental growth has contracted every month this year to date,” Khan said. “A number of listings in several residential communities registered a reduction in their rental rates as landlords who got ahead of the market are forced to adjust asking rents lower.”
Rents are starting to moderate in areas such as the man-made island of Palm Jumeirah and residential buildings around the world’s tallest tower in Downtown. Asking rental rates in popular areas like Business Bay and Dubai Marina are also coming down, according to CBRE. The average apartment rental reached 108,606 dirhams last month — the same level as in 2017, it said.
At the same time, the number of property transactions fell 8.3% in September from a year earlier mainly due to a 42% slump in off-plan sales as new projects sold out and developers ran out of inventory. Sales of existing homes climbed 30.5%.
“We see some softness definitely in the demand and supply of mortgages,” said Samy Chaar, chief economist at Banque Lombard Odier & Cie SA. “While rents and prices are near record, when we look at transactions and bank loans, it’s slowing somewhat” as interest rates rise.