Real Estate

Dubai tenants staying put as rents continue to soar

May 23, 2023, 7:22 AM

Renewing an existing tenancy in Dubai is proving more attractive as rents rise

Rental renewals up 29.7% in Q1, new registrations down 12.6%
Reports of landlords attempting to evict tenants to push up rents
Record number of residential sales amid buoyant conditions

More Dubai renters are opting to renew their existing tenancies than move to a different property altogether, to avoid being hit by soaring rental rates in a “very strong” property market, according to CBRE.

The number of rental renewals in Dubai’s residential market grew by 29.7 percent year-on-year in the first quarter of 2023, compared to a 12.6 percent drop in new rental registrations, the consultancy’s latest UAE real estate market update reports.

The figures “highlight the fact that tenants are less willing to move, particularly when considering the potential higher rents when relocating – especially in key residential hubs,” CBRE said.

Rents increased by 26.3 percent in the 12 months to the end of March as the emirate’s real estate market performs strongly on the high demand against a strong economic outlook.

The figure represents a “moderation” from the 27.7 percent annual growth registered in February; “nonetheless, elevated rental rates have significantly impacted demand”.

Average apartment rents increased by 26.3 percent in Q1 and average villa rents by 26.2 percent.

The total number of rental contracts registered – both new and renewals – rose by 8.9 percent to 148,882, according to the report, which cites figures from Dubai Land Department.

Landlords in Dubai have been attempting to evict long-standing tenants to bring in new ones at higher rates.

The emirate’s residential market is “very strong” at present, said CBRE, with both rental and sales values experiencing significant uplifts in the past year following hefty declines during the pandemic.

Dubai regulations require landlords to give tenants 12 months’ notice of eviction, then either move in themselves for at least two years or sell the property.

Government imposed rent controls (set by the Real Estate Regulatory Agency, part of Dubai Land Department), limit the amount a landlord can raise rents to between 5 and 20 percent a year. However, some landlords have been advertising properties for as much as twice what the current tenants are paying, according to local media.

Dubai’s residential market continues to see strong levels of demand. A record 29,332 transactions were recorded in Q1 2023 – the highest total ever registered during the first quarter of a year and up 54.2 percent from the year-earlier period, according to CBRE.

Average residential sales prices grew by 12.8 percent in the year to March 2023, with average apartment prices rising 12.4 percent to reach AED1,234 per square foot, and average villa rises increasing by 14.8 percent to AED1,455 per square foot.

Apartment sales rates still sit at 17.1 percent below the highs seen during the last market peak in 2014. But some core and prime locations have surpassed these levels, and villa sales rates have already surpassed them by 0.7 percent, the report added.