In 2022, property rental prices in Dubai skyrocketed. As a result, the income of landlords also increased. How much has the rent increased? Will rent growth continue in 2023? Should investors invest in real estate to generate rental income? We deal with the experts of the real estate agency OWRealty.
How much has rent prices increased in Dubai
Property rental prices in Dubai in 2022 showed a significant increase. According to analysts from the international consulting agency CBRE, as of February 2023, the average rental price in the emirate increased by 27.7% over the year.
According to CBRE as of February 2023:
- Renting an apartment in Dubai has become more expensive by 27.9%
- villa rental in Dubai - at 26.3%
The average rental price per year was:
- per apartment — 27 150$
- per villa - 80 400$
Rent growth rates outpace price dynamics in the finished and under construction market. CBRE reports an average annual increase in property prices of 11.5%. Thus, the cost of rent is growing 2.4 times faster than housing prices. This creates favorable conditions for investing in real estate in order to receive passive income.
In which areas of Dubai the price of rent has increased the most
The highest increase in the price of renting apartments in 2022 was noted in the areas:
- Dubai marina. Rent increase on 33%. Average annual rental price 27 000$
- Palm Jumeirah. Rent growth at 29%. This is the most expensive area in Dubai for rent. The average rent here is 71,000$ for apartments and 277,000$ for villas.
- Downtown Dubai. Rent growth at 28%. Average annual rental price 31 000$
- Mohammed Bin Rashid City. Rent growth at 27%. Average annual rental price 19 000$
The highest growth in rental prices for villas and townhouses was observed in areas:
- Meydan. Rent increase by 55.6%. Average annual rental price 76 000$
- Dubai Hills Estate. Rent increase by 48.6%. Average annual rental price 63 000$
The COVID-19 pandemic has spurred demand for rentals and individual living. Dubai attracts more and more wealthy people who can afford to rent a villa in an elite area. The popularity of villas is growing every year, as are their prices.
The dynamics of rent growth depends on the area where the property is located. Most of all, renting an apartment in Dubai has risen in price in prestigious areas on the coast of the Persian Gulf. In these locations there is luxury real estate near the beaches with a high level of service and various amenities. There is not much free development space left here, so real estate and its rental in coastal areas will only increase in value over time. These are the most promising areas for investment in Dubai.
Why is the price of renting housing in Dubai on the rise?
In 2022, 11% more lease agreements were recorded in the Ejari system (electronic registration of lease agreements) than in 2021. The population of Dubai is growing. As a result, the rental housing market is expanding.
According to the forecast for 2023, rents in the emirate will continue to rise in price. The following factors contribute to this:
- a large influx of foreign citizens who choose Dubai as a permanent place of residence, where they can comfortably work and open a business
- the course of the Dubai authorities to increase the number of the emirate by 2040 to 5.8 million people (now 3.5 million)
- limited supply in popular areas amid high demand
- restoration and active development of the tourism industry in the post-COVID period. In 2022, Dubai became the most popular tourist destination in the world according to the global travel platform TripAdvisor.
Dubai Rental Market Trends
At the end of 2022, analysts note three main trends:
- The rental market in the emirate remains a landlord's market. Some tenants experienced a one-time fee increase immediately on 20%. They are forced to accept the conditions of the landlords and agree to a rent increase due to the inability to find a better option.
- Tenants prefer to renew existing contracts rather than looking for new housing. According to CBRE, in the first 2 months of 2023, there were 13% fewer contracts registered than in the same period last year, while the number of renewals increased by 30.7%.
- Selection of the best areas available, interest in luxury real estate in areas Dubai Marina, JBR, Palm Jumeirah. This is due to the influx of wealthy people who choose Dubai as their “second home”. Not all of them are immediately ready to purchase their own housing and stop at the rental option.
Is it worth investing in Dubai property for rent?
According to real estate analysts, in 2022, the average rental yield in Dubai rose to 6.5% from 5.7% a year earlier. In some prestigious areas, it reaches 10%.
For investors who choose to buy real estate for further renting out, the current situation opens up ample opportunities for a quick return on investment.
In 2023, there is an ideal position for investing in real estate in order to generate passive income. Rent prices are rising faster than home prices. Due to the influx of new residents, demand remains steadily high.
OWRealty experts advise choosing for investment in order to rent out finished real estate or housing at the final stage of construction. Then you can get a high income in the near future.
Projects at the start of sales are less suitable for renting out. They will be completed in 3-5 years, and the situation on the rental market in the long term is difficult to predict.
OWRealty agents are ready to select properties for investment from 500 objectsthat are in the database, and recommend the best of them, based on location, amenities and infrastructure.