Residential Rents in Dubai Expected to Fall


After the rapid rent increase in Dubai in the past couple of years due to the announcement about hosting Expo 2020, apartment and villa rents normalized in the first three months of the year. Now, before the start of the slow summer season, residential rents in Dubai are expected to fall further, as supply from newly-opened and upcoming developments will ease the demand for living space.

The boom of the construction sector in Dubai is expected to lead to an abundance of residential properties, which will not only slow down further the growth in sales prices and rents, but also result in decline. Around 2,000 apartments and villas have already entered the real estate market since the beginning of the year and by its end, another 19,500 or so are expected to be available. This will affect sales prices, as well as rents, which are said to be already falling in some areas and certain developments across the city. Sales values in the residential sector saw a decline in the first three months of the year, compared to the previous quarter. However, they are still up on an annual basis.

Average rents for apartments in the emirate registered a slight increase of merely 1 percent from the previous quarter and 5 percent, compared to the same period in 2014. The decline in villa rents, especially in some developments, were more substantial – by an average of 5 percent from last quarter. The stabilization of the market, combined with the new supply, provided by constantly opening new residential complexes, will most likely result in even more apparent decreases in both sales and rent prices. While demand stays strong, buyers and tenants will now look for the most attractive properties – not only in terms of location and quality, but also price. Thus, developers might need to look for more affordable projects, instead of delivering mostly high-end residential and commercial units.

Office rents, on the other hand, are still posting hikes. Compared to the same period last year, grade-A offices were offered at 15 percent higher rents. The demand for retail space is also high, evident from the 10 percent quarterly hike in store rents. The new supply of five- and four-star hotels resulted in an annual fall of revenue per average room (RevPAR) of around 9 percent. Another factor for the declining revenues was the drop in Russian tourists.


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