Asking residential rents in Dubai have leapfrogged and moved at the highest pace in five years, according to a new ValuStrat report.
Average annual rents stood at 78,181 UAE dirhams ($21,000) during the third quarter of 2021, up 6.9 percent compared to the same period last year, a record increase not seen since early 2015, the consultancy firm said.
On a quarterly basis, citywide rents were up 3.6 percent. The most notable increases, however, were reported in the villa segment of the market, which continued their rally upwards in the third quarter, rising by 14.1 percent, while apartment rents went up by just 2.6 percent compared to a year ago.
Studio apartments now cost around 36,000 per annum on average, while one-bed and two-bed flats are estimated to cost around 53,000 dirhams and 76,000 dirhams per year, respectively.
The residential market also recorded an occupancy rate of 81.3 percent in the third quarter, slightly up from 80.6 percent in October last year.
According to Haider Tuaima, head of real estate research at ValuStrat, the rents for villa properties are likely to continue rising until new supply changes the dynamics in the market. However, the trend is not the same for the apartment category.
“Villa rents have risen, significantly in some districts, and are likely to remain strong till new supply washes in over the next couple of years. Conversely, apartment rents are softer with less increases,” Tuaima told Zawya.
Dubai’s residential rents had been on a decline prior to the coronavirus pandemic due to housing demand not keeping with supply. The trend continued in 2020, when thousands of residents lost jobs as result of the pandemic.
With the massive vaccination campaign, the economy is starting to show signs of improvement. Dubai’s Department of Economic Development (DED) has predicted that the economy could growth 3.1 percent this year and 3.4 percent in 2022. Expo 2020 is expected to drive economic growth.
However, property consultancy firm Asteco had said that the focus of housing demand in Dubai has been on the villa segment. It noted that the rental growth in the apartment category appears to be “inflated”, particularly as new supply outperforms population growth.
According to ValuStrat’s report, total estimated completions as of the third quarter of the year stood at 16,654 apartments and 3,397 villas, equivalent to 49 percent of the preliminary estimates for 2021.
Dubai’s population also stood at 3.4 million during the third quarter, registering a slower 5-year growth rate of 5.1 percent, according to Dubai Statistics Centre.