Dubai's Rental Market: Trends and Transformations
The Evolution of Dubai's Rental Market: Why Current Trends Might Change?
Dubai's real estate market has shown remarkable growth in recent years, significantly impacting rental rates. Until now, tenants have primarily opted for lease renewals to avoid the higher costs associated with new rental agreements. However, the entry of new residential units into the market may alter this trend.
Narrowing the Gap Between Lease Renewals and New Contracts
According to Matthew Green, Head of Research at CBRE Middle East and North Africa, most tenants still prefer renewing their leases to avoid extra costs from higher new rental fees. However, the completion of new residential projects, particularly in areas farther from the city center, offers more competitive prices and larger living spaces, attracting more tenants to consider relocating.
This process is narrowing the gap between renewed leases and new rental agreements as tenants find new apartments more appealing due to favorable terms and modern amenities.
Impact of New Residential Units on Rental Rates
In 2024, fewer than 25,000 new residential units were completed in Dubai, while in 2025, about 45,000 new properties are expected to enter the market. Nevertheless, the strong population growth – which has already reached 3.8 million – continues to pressure the rental market. However, significant growth in new housing is expected to peak between 2026 and 2028 as the development cycle reaches its zenith.
According to Cushman & Wakefield Core's forecast, rental rates may gradually decrease with the introduction of new supply and the Smart Rental Index, which could balance the differences between new rents and renewed leases more evenly.
Statistical Data and Market Trends
According to Dubai Land Department data, rental contract registrations increased by 7% in the last quarter of 2024 compared to the same period the previous year. Within this, renewed contracts rose by 9%, while new lease agreements grew by 5%.
According to Betterhomes' forecast, a record 72,365 new residential units will be delivered in 2025, representing a 171% increase from the previous year. CBRE data indicates that apartment rental rates increased by 16% and villa rates by 13% in 2024.
The Role of the Smart Rental Index and Cooling Measures
In January 2024, the Dubai Land Department introduced the Smart Rental Index, which more accurately reflects property quality and features. This new system makes rental pricing fairer and rental terms more transparent.
Additionally, the UAE Central Bank has limited lending on transaction fees, like the 4% registration fee, which could reduce speculative activities. This is particularly important since property transactions reached a record of 434 billion dirhams in 2024, a 33% increase over the previous year.
Developer Strategies and the Future of the Market
Besides market cooling measures, developers are also adapting to the new situation. They offer increasingly aggressive payment schedules, such as asking for larger down payments and requiring most payments during construction, not upon property delivery.
According to real estate advisory firm Savills, Dubai's property market will continue to show strong growth in 2025. Trends like increased investor confidence, demand growth for off-plan properties, and a heightened interest in luxury real estate will remain defining.
Dubai's rental market is undergoing dynamic transformation. While tenants remain inclined to renew leases to minimize costs, the appearance of new residential units and competitive prices could encourage more people to move. The Smart Rental Index, new regulations, and developers' strategies all contribute to keeping Dubai's real estate market attractive for both tenants and investors.
