Rent increase could increase inflationary pressure in Dubai
A further increase in real estate prices and rents in Dubai could increase rent-related inflation, said a top real estate expert. The emirate witnessed over 30,000 transactions in Q2, 2023 resulting in sales value of Dh91 billion, growing by 35 percent in the corresponding period last year, that reflects strong demand for properties. According to Dubai Land Department, Dubai’s real estate saw transactions worth Dh283 billion (US$77 billion) in H1 2023, which is more than three times the total value of the land and property transactions of Dh81.03 billion recorded in 2019.
According to CBRE’s mid-yearly report, the excessive demand for houses has aggravated the supply shortage. This has inevitably set the price to grow, although at a slow pace.
CBRE’s head of research, Taimur Khan, said in an interview with Gulf Property, “From a general perspective, the Dubai market shows no sign of decreasing in the near future. Due to the demand-supply imbalance, prices will evidently rise. This will also catalyse rent growth too.”
When asked about the possibility of market stability, Khan predicted that Downtown and Palm Jumeirah will level. The influx of rich investors has accelerated the supply rate for high-end estates in Dubai. Prices will return to normalcy as more capital enters the market.
Dubai is the top global market for luxury properties. As per Knight Frank’s report, 92 homes worth at least US$10 million each were being sold during the first quarter of 2023. The city overtook Hong Kong and New York which recorded 67 and 58 respectively.
CBRE’s report further announced that the total volume of transactions peaked in H1 2023, reaching 43.3 percent in a year. The demand surge propelled significant price rise.
In another CBRE analysis, the average rental growth rose by 22 percent for the year until July. According to DLD, total lease contracts registered reached 355,515 in the first half. Khan pointed out that the demand-supply imbalance, particularly at newer locations in affordable regions, will cause positive rent growth. This will inevitably appear as a concern among middle-income families.
Mid-range estates like Sports City and Living Legends witnessed 2.6 and 3 percent rise respectively across apartments in July. Khan also affirmed that the rise will continue to increase in the next year. Therefore, tenants will have to ensure ways to maintain their budget.
While prices will grow at a steady pace, which will allow investors to plan ahead of time, tenants will have to be alert for inconsistent rent inflation.
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