With more people settling in Dubai long-term, homeownership has become an increasingly attractive option for those who can afford it
Over the next three years, the Dubai real estate market is set to experience an annualised rate of supply expected to increase by 88 per cent. However, when breaking this down into specific categories—villas, townhouses, and apartments—different dynamics emerge. The independent villa market, for instance, will account for just 9.5 per cent of the total supply increase, which suggests that the upward pressure on prices in this segment will continue. In established villa communities, supply is limited, and because you cannot easily replicate their prime locations, prices will naturally rise as demand remains strong.
The apartment market, on the other hand, offers a different story. With a considerable amount of new supply entering the market from off-plan launches, prices in this segment are expected to stabilise. Unlike villas, where supply is constrained, the apartment sector will benefit from a steady influx of new developments, especially in emerging areas. This will likely ease some of the upward pressure on prices, offering more affordability for tenants and a wider range of options for investors. While demand will remain robust, especially in prime locations, the availability of new apartments should help balance the market.
Espace Real Estate’s Q3 2024 report revealed that across-the-board rental transactions continue to drop with rental values continuing to rise significantly, maintaining a trend whereby tenants are opting for homeownership if they can afford to do so. This indicates that many tenants are choosing homeownership over continuing to pay high rents. Several factors are driving this shift, including rising rental prices, a relatively affordable mortgage market, relaxed visa regulations, and ongoing population growth. With more people settling in Dubai long-term, homeownership has become an increasingly attractive option for those who can afford it. This trend reflects a broader secular shift in the market, where tenants, faced with steep rent hikes, are opting to invest in their own properties instead of continuing to rent.
For those unable to purchase a home, rental affordability is becoming a more pressing challenge. Many tenants are being priced out of established communities and are forced to look for more affordable options in less central locations. While these areas may be farther from the city centre, they offer lower rental prices, and tenants willing to extend their commute by 30 minutes, or more are finding more choices. This trend is expected to continue as tenants seek greater value and more space, even if it means moving to communities farther from the city’s core.
The so-called “COVID rates,” which provided temporary relief to tenants during the pandemic, are now a thing of the past. As of 1 March, the RERA rental calculator was updated to align future rent renewals more closely with current market conditions. This updated tool gives landlords and tenants a clearer picture of how much rents can increase upon renewal, based on benchmark rates for each community. With this adjustment, rental prices are expected to continue their upward trajectory, as the calculator now reflects the real-time dynamics of the market.
In terms of communities experiencing the biggest price increases, the luxury segment has seen the most dramatic growth. The report highlighted that Palm Jumeirah experienced a 200 per cent year-on-year price increase, while Jumeirah Islands saw a 97 per cent rise. This surge is largely driven by investors who have transformed standard properties into modern, high-end villas, which in turn has fuelled demand and significantly driven up prices. These high-end communities are particularly attractive to wealthy buyers seeking luxury living, making them some of the most competitive markets in Dubai.
Corporate relocations are also playing a significant role in driving demand for residential properties in Dubai. In the first half of 2024, the city saw a surge in demand for office space, fuelled by new businesses establishing operations and existing companies expanding. This corporate influx brings with it an increased demand for housing, as more professionals move to the city and seek accommodation. Dubai’s ranking among the top three cities for highest property yields—with averaging rental prices also rising 12.1 per cent in the first half of 2024—further solidifies its appeal to investors, driving both rental and purchase demand in the market.
Another factor influencing the rental market is the scarcity of modern, upgraded villas and townhouses, particularly at the family-home level. In popular areas like Emirates Living and Jumeirah Park, many rental properties remain in their original condition, making them less attractive to tenants seeking quality homes. When upgraded stock becomes available, it is quickly snapped up, whether it’s a one-bedroom apartment or a high-end luxury villa. This demand for quality properties is consistent across all price points, with tenants increasingly looking for modern, well-maintained homes that offer more than just a prime location.
In conclusion, while the apartment market will see some price stabilisation due to increased supply, the villa segment will continue to experience upward pressure due to limited stock and strong demand. Tenants will need to navigate these trends, with many opting for homeownership as a long-term solution, while others explore newer, more affordable areas for rental opportunities. As the market continues to evolve, it will be crucial for both investors and tenants to stay informed and make strategic decisions in this dynamic landscape.
Credit; Arabian Business
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