Rise in Dubai villa rentals comes with a warning

It’s not just sales of luxury homes in Dubai that are skyrocketing, rental prices are too.
The average annual rent for a villa or family home in the emirate reached 268,758 dirhams ($73,171) last month after prices jumped 26% in the year to September , according to property adviser CBRE Group Inc. Average apartment rents, meanwhile, soared 27% to 89,986 dirhams.
The surge in rental prices is due to the growing number of expatriate workers moving to the city, according to CBRE research manager Taimur Khan. It also reflects soaring luxury property prices, which have jumped 89% in the past year, property consultancy Knight Frank said earlier this week.
The average sale price of villas rose 14%, while apartment prices rose 9% through September, according to CBRE. But CBRE warned that such rapid growth could impact Dubai’s attractiveness.
“The growth rate of certain typologies and certain neighborhoods can start to have a very significant impact on the affordability of the city,” Khan said. “This in turn could impact its competitiveness and lead to negative spillovers to other sectors, particularly in the face of high living costs and a slowing global economy.”
Demand for renting and buying homes in Dubai is booming as the government’s handling of the pandemic and its liberal visa policies attract more foreign buyers and residents. The emirate’s property market is benefiting from an influx of newcomers, including bankers fleeing tough Covid restrictions in Asia, crypto investors and wealthy Russians fleeing their sanctions-hit country after its invasion of Ukraine .
Apartment rentals on the city’s man-made island, Palm Jumeirah, peaked at 231,397 dirhams on average. While annual villa rentals in the upscale Al Barari district reached 946,270 dirhams, CBRE said. “Rates are rising at the fastest rate ever and that’s making the divide between core areas and secondary areas much more pronounced,” CBRE’s Khan said. “Some secondary areas are experiencing occupancy levels of around 95%.”
Soaring prices are pushing out some prime areas. Sahar Samara, for example, is moving her family from their 4-bedroom apartment in the Palm Jumeirah to a villa 30 minutes away on the outskirts of town. After receiving an eviction notice, Samara searched for a house in the area but found comparable properties listed at 475,000 dirhams, a 150% increase on her current rent.
“It’s exhausting with so much financial cost and emotional distress, especially for children who will now be away from their friends and have a long commute to school,” she said.
Rental prices could start to moderate early next year, CBRE’s Khan said. Monthly increases are slowing, indicating that many tenants are voting with their feet and moving to cheaper areas, he said.
Buyer demand has also increased. The number of home sales in the year through September hit its highest level since 2009, CBRE said.