ALBAWABA – After more than two years of soaring rents, due to the influx of foreign investment and capital and surging real estate prices, rent in Dubai is slowly moderating, Bloomberg reported Thursday.
Even though rent in Dubai is rising at an unfathomable pace, the rate is finally beginning to moderate in some of the city’s most desirable neighbourhoods, according to CBRE Group Inc.
Rents climbed to record rates in the last few years, following an influx of newcomers to Dubai, driving average rent rates by 20.6 percent in the year through September alone. However, the growth rate is lower than the one seen a month earlier, in the year through August, at 21.7 percent, as reported by Bloomberg.
Over this period, the average leases for apartments and villas rose 20.7 percent and 20.1 percent, respectively, the real estate adviser’s data showed.
In September, the average annual rent for a villa reached a record $87,870, according to Taimur Khan, CBRE’s head of research. While prices are likely to continue climbing, due to limited supply, they are expected to slow down the pace of the climb gradually, as lessees dodge price hikes, he said.
More and more tenants are looking to relocate to the edges of the city or are fighting eviction notices in court, Khan pointed out.
The UAE has seen an influx of businessmen and investors in the past couple of years, which partly drove rent to Dubai sky-high - Shutterstock
“Despite demand remaining elevated, the rate of rental growth has contracted every month this year to date,” he underlined.
“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 [their] 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 Downtown, Bloomberg reported.
Asking rental rates in popular areas like Business Bay and Dubai Marina are also coming down, according to CBRE, with the average apartment rent at $29,568.34 last month. These are the same prices seen in 2017, the firm said.
Meanwhile, the number of property transactions fell 8.3% in September 2023, compared to September 2024, due to a 42% slump in off-plan sales as new projects sold out and developers ran out of inventory. Nonetheless, 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.
Another reason behind soaring rent in Dubai is the skyrocketing real estate prices, combined with higher interest rates, which has driven people to lease instead of buying.
