Affordable Apartments in High-Demand Areas Experience Up to 17% Rent Hike
Dubai tenant Salim Ahmed recently received a notice of rent increase from his landlord, pushing his annual rent beyond his budget. However, Ahmed has made the decision to stay in his current residence.
“My landlord has raised the rent by approximately Dh5000. Initially, I considered moving to a different apartment in the area. But when I calculated the expenses associated with relocating, I realized it wouldn’t significantly reduce my costs,” he explained.
Ahmed is among a growing number of tenants who are opting to remain in their existing homes despite facing rent increases. The number of new tenancy contracts has declined in the first eight months of this year as tenants increasingly choose to renew their existing agreements.
According to CBRE Middle East, 376,211 rental transactions were registered in the year-to-date figures up to August 2023, marking an 8.7 percent increase compared to the previous year and a 48 percent increase from the same period in 2019. This growth has been driven by a 28 percent increase in renewed registrations. While new rental contracts have decreased by approximately 12 percent.
Taimur Khan, Head of Research at CBRE Middle East, attributed this significant decline in new rental registrations to the high costs associated with relocating or signing new leases, resulting in a significant disparity between new and renewed rental rates.
Another tenant, Noor, emphasized that the costs of relocating are nearly equivalent to the rent increase. “Moreover, there is wear and tear on household items when moving to a new flat, and I am very particular about my belongings. Because I have collected them carefully,” said Noor, who has been living in Dubai for two decades.
Rising Rents in Dubai
According to the H1 Dubai Property Market Report released by Bayut, rents for affordable apartments in popular districts of the emirate have risen by up to 17%. The cost of renting luxury apartments has significantly increased, with hikes of up to 32%. Similarly, reasonably priced villas in sought-after neighborhoods have seen rent increases of up to 50%. While luxury villa rentals have surged by up to 70%. Importantly, there has been a slight slowdown in the rate of rental growth in recent months.
CBRE Middle East reported that average rents in Dubai increased by 21.7% in the year up to August 2023, slightly down from 22% in July 2023. During this period, average apartment rents rose by 21.5%, and average villa rents increased by 22.6%.
“Although demand remains strong, we are observing a continued moderation in the rate of rental growth, marking the seventh consecutive month in which this trend has occurred,” stated Khan.