Dubai Rental Market: Brace for Big Changes

Dubai Rental Market under Pressure: 200,000 New Properties by 2025-26

Dubai's real estate market is poised for significant changes: after the handover of 30,000 new residential properties in 2024, an additional 210,000 units are expected to enter the market in the next two years. This immense supply is likely to exert pressure on rental prices in 2025 and 2026, according to the latest analysis by Fitch Ratings.

After three years of dynamic price increases, signs of stabilization have already appeared in the first quarter of 2025, both in unit prices and rental rates. Fitch indicates that rental rates will continue to face downward pressure due to the large-scale project portfolio, and lower rental rates could also impact property values. While a collapse similar to the 2008 crisis is not expected, the decrease in rental yields and the expansion of supply could lead to a moderate price drop. The extent of this decline will depend on how willing property owners are to accept lower yields and whether interest rates remain persistently high.

According to Fitch, the average gross rental yield for residential properties in Dubai fell by about 30 basis points from the second half of 2024 to the first quarter of 2025, but remains at a healthy level of around 7.4%. This does not indicate a collapse, but shows signs of correction.

Stabilizing Market with Varying Local Trends

Local real estate experts indicate that Dubai’s rental market is becoming increasingly stable. The growth of average apartment and villa prices practically halted in the first quarter of 2025, with increases of 0% and 1%, respectively. However, on an annual comparison, growth remains positive: 9% for apartments and 7% for villas. In certain districts, rental prices continue to rise, especially where there is little new supply or where premium-quality apartments have emerged. In other areas, the market is adjusting as the arrival of new apartments and an increasingly price-sensitive approach from residents reshape demand.

Smart Rental Index and Future Outlook

The Smart Rental Index introduced by the Dubai Land Department (DLD) in early 2025 plays a significant role in stabilizing rental prices. This tool helps make rental rates more transparent and balanced, promoting fair market operations.

Real estate firm Asteco suggests that further market corrections are anticipated in the upcoming period. Although established, older communities with little new development have limited supply, the market as a whole is rapidly expanding. The substantial number of new residential properties and the upcoming, abundant development pipeline are expected to create a more balanced environment, mitigating price hikes and offering residents a wider selection.

Overall, Dubai’s real estate market is facing an exciting period in 2025-26: the increased supply may benefit renters, but investors will need a more cautious approach. Anyone planning long-term rentals or investments should monitor market developments closely and take advantage of new opportunities.

(Source of the article: Fitch Ratings press release.)