Despite the past six years of negative growth in the Dubai rental market, the six months to June 2021 have shown signs of a rapid recovery for this sector. As the market continues to expand, Knight Frank forecasts that the next year will see ‘historic levels’ of supply with residential units in Dubai predicted to increase by approx. 47,000 from 2020.
So, the question remains: has the rental market in Dubai reached a turning point?
In the first six months of 2021, rental prices across Dubai rose by 5%, according to a recent Savills report. One fifth of this growth was accounted for by an increase in villa rentals, as renters opted for more spacious and isolated living conditions in the wake of the COVID-19 pandemic.
The report, which analysed the rental values and yields for residential real estate markets in 30 key locations worldwide, saw Dubai place among the top three cities globally to record the highest levels of rental growth in the six months from January to June of this year.
This hike in rental prices represents a tenfold increase on the average growth of 0.5% across all 30 cities included in the index. It follows a mean decline of -1.8% in 2020, a consequence of the fallout of the current global pandemic.
GLOBAL REAL ESTATE INVESTMENT ON THE RISE
Globally, real estate investment underwent a transformation this year as the multifamily residential sector emerged as the largest, leapfrogging the commercial sector for the first time since records began in 2007, Savills found.
The first half of the year recorded around $136 billion investment in residential real estate globally, a 35% increase on H1 of 2020.
As per the change in transaction volumes in H1 2021 versus H1 2019, Dubai ranked 4th out of 30 cities after Singapore, Seoul, and Beijing, surging just shy of 50%.
A SERIES OF INFLUENTIAL EVENTS
The COVID-19 pandemic undoubtedly impacted Dubai’s real estate market by increasing volatility and minimising levels of tourism and immigration to the city.
Yet as restrictions on freedoms and movement continue to ease, short-term lets are recovering well as people prioritise the heightened levels of flexibility, space, and hygiene, that come with apartments, villas, and town houses. Many are opting for hotel apartments, with occupancy levels reaching up to 95% at times, Ayman Ashor, general manager, Al Bandar Rotana and Al Bandar Arjaan said.
The surge in demand for hotel rooms, apartments and rental properties is also accountable to Expo 2020, which will attract millions of visitors to the city over the next six months.
In certain areas, rents for hotel apartments have more than doubled in the run-up to Expo and are set to continue rising as the event progresses. Longer-term, Expo 2020 could likely trigger a turnaround of the UAE’s real estate sector and create opportunities for developers to profit from a decade of phenomenal growth, Bruno Wehbe, Vice President at Booz Allen Hamilton predicts.
VARYING LEVELS OF PRICE AND DEMAND
As is to be expected by the high number of luxury hotels and apartments, the locations bordering the beachfront and marina areas such as Dubai Marina, Palm Jumeirah, Bluewaters, and Jumeirah Beach Residence are the most popular with tourists and leisure guests to the city.
Where corporate and commercial visitors are concerned, accommodation is most sought after in the Downtown, Business Bay and DIFC areas.
As of September 2021, Palm Jumeirah is the community with the highest median rent at AED 617, 650 per garden home, as compared to Discovery Gardens, the area with the lowest rent at AED 24, 779 per apartment.
As visitors more commonly seek private and secluded areas of the city, demand in villa communities including Victory Heights, Jumeirah Golf Estates and Emirates Living is also rising, Property Monitor data shows.
When it comes to villas, Jumeirah Islands has the highest median rent (AED 324, 000) versus Falcon City of Wonders (AED 105, 850), which is the lowest.
Finally, considering average gross investment yields, at 7.87% Remraam tops the list, closely followed by Dubai Studio City (7.80%) and International City (7.79%).
EXPAND YOUR REAL ESTATE KNOWLEDGE
Subscribe to the Cityscape Intelligence newsletter here