Like H1, the second half of 2022 started on a strong note for Dubai real estate market, as it continues its golden run based on stellar property investment options, attractive sales prices and associated benefits. However, growth in any sector can be a double-edged sword, with positivity seen in one aspect but the other side may be plagued by visions of growth spiralling out of control. Currently, this is the same situation prevailing in Dubai real estate market, especially when if we look at rental trends in the market.
August 2022 was a record-breaking month in over a decade with 9,720 sales deals valuing AED 24.3 billion. The previous two months, June and July, also crossed AED 20 billion mark in terms of sales value. The growth is not limited to sales only but the rental segment has also shown an upward tick. Over the past 12 months, a significant rise in rental prices for properties for rent in Dubai is also seen nearly in all sectors – around 32 per cent on average in certain communities and a year-on-year increase of more than 40 per cent.
Analysis of growth in Dubai rental market
Several prime areas in Dubai have recorded higher activity in rental terms, fuelled by the influx of visitors and high-net-worth individuals and the strong demand for luxury properties for sale in Dubai. Statistics reveal that Dubai Marina, Downtown Dubai, Palm Jumeirah and Business Bay remained the preferred choice for tenants and investors alike throughout 2022. A significant increase in both demand and rental prices were observed in all these prime communities in Dubai.
Rental prices in Palm Jumeirah
When it comes to rental properties in Palm Jumeirah, the rental cost for an apartment can vary up to $800,000 a year. The lowest priced rental apartment is $17,000 a year for a 548 sq. ft. studio. The Palm Jumeirah’s most expensive rental property is a four bedroom penthouse in Andaz Hotel – rented at $817,000 a year. Another penthouse located in the FIVE Hotel is rented at $477,000 for a year.
Rental prices are not just skyrocketed for residential rental properties but rent for offices in Dubai also spiked higher than UK and USA. Moreover, the average apartment prices were 7.7 per cent higher on annual basis in August 2022, while villa prices rose by 15.8 per cent annually. On a monthly basis, prices for apartments for sale in Dubai were up by 0.5 per cent compared to July and villa prices rose by 0.3 per cent.
Not just sales but a surge in rental prices recorded
According to real estate adviser CBRE Group Inc., the average rent for villas in Dubai touched AED 268,758 in September, showing an increase of 26 per cent in the year. Meanwhile, average rents for apartments soared 27 per cent and reached AED 89,986.
The surge in rental prices is a result of the growing number of expatriates moving to Dubai – following the introduction of new visa reforms. Resultantly, Dubai real estate market is benefitting from an influx of new investors entering the market including bankers from Asian countries, crypto investors and wealthy Russians escaping the sanctions-hit country.
“The rate of growth in certain typologies and neighbourhoods may start to impact affordability in the city very significantly,” Taimur Khan, Head of Research at CBRE said. “This in turn may impact its competitiveness and lead a negative spill-over into other sectors, particularly amidst a high cost of living and softer global economic backdrop.”
Record sales for properties at Palm Jumeirah
Earlier this month, Dubai’s most expensive waterfront villa worth $82.2 million was sold on Palm Jumeirah – becoming the most expensive home to be sold to date. The expected date for the completion of construction for this villa is the first quarter of 2023. Casa Del Sole is the fourth of a set of six properties that Alpago Properties has been developing on Billionaires’ Row.
Spread over four levels, the plush villa has a lot to offer to the potential resident including 8 bedrooms, underground parking to cater to up to 15 cars, a home cinema, a bowling alley, a fully-equipped gym, a sauna, an infinity pool, a Jacuzzi, a game room and private beach.
Prime areas in Dubai in higher demand
Luxury properties for sale in Dubai have become attractive for savvy investors and property buyers all over the world because of the emirate’s new visa policy and the ease of doing business. These economic reforms have positive impact on the Dubai real estate market, in particular. “We developed six villas and have nearly sold all of them,” Murat Ayyildiz, founder and chairman at Alpago Group told Bloomberg.
Over the past 12 months, the demand and the prices for luxury properties for sale in Dubai have massively increased. The prices of luxury properties at several prime locations in Dubai have increased at an astonishing level over the past year, with values increasing as much as around 90 per cent. Knight Frank, a property consulting firm in Dubai, confirmed the spike of 88.8 per cent for luxury properties for sale in Dubai.
“Prime residential values in Dubai continue to strengthen, growing by 29 per cent in Q3 alone, fuelled by a persistent deluge of UHNWI individuals who are zeroing in on Dubai’s premier districts, in search of second homes. This trend marks a significant departure to the emirate’s two previous market cycles, where the overriding flavour of buyers was linked to buy-to-let or buy-to-flip purchases,” Faisal Durrani, Knight Frank partner and head of Middle East research said.
Conclusion
To sum it up, we can state that Dubai rental market is expected to grow at a rapid pace, especially in prime areas. On the other hand, the rental prices in average areas may start to moderate by next year because several tenants (who moved to villas or bigger places during COVID-19 induced pandemic) may start moving to cheaper areas.
However, seeing the increase in rents and demand for properties for sale in Dubai, we can say that it is an ideal time to invest in Dubai real estate. And who else can be your better companion than the sales team at HFRE? You can reach us at +971 4876 2473 to register your inquiry. Awaiting response!
