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Dubai real estate: Apartment rents to rise further on revised RERA rates, says report

The real estate cycle in Dubai is expected to enter a new phase, with a resurging apartment market and more tempered growth in the villa market    

The real estate cycle in Dubai is expected to enter a new phase, with a resurging apartment market and more tempered growth in the villa market, according to a new report by ValuStrat.

Potential lower mortgage rates may encourage tenants to transition to home ownership, given the trend of faster rising rents compared to capital values.

The recently announced Dubai Metro Blue Line is expected to influence demand in communities with improved transport links.

The Dubai Metro Blue Line expansion will span 30 kilometers and include 14 new stations, linking 9 different areas according to the Dubai 2040 Urban Plan

Apartment rents could continue to rise, especially for new contracts, and existing tenants might experience increases in annual renewals due to updates to the RERA rental calculator.

Villa rents have reached possible price ceilings, leading buyers to pursue more affordable options, and this trend is anticipated to persist in early 2024, analysts said, adding that investors and buyers are advised to be cautious towards high-end villa communities.

In terms of residential prices and rents, the UAE plans to raise Emiratisation targets, requiring companies with 20 to 49 workers to hire UAE nationals. Changes to the Labour and Domestic Workers Law will be implemented in 2024.

The retail sector will see the opening of new shopping centers, including Nad Al Sheeba Mall and Agora Shopping Mall. The share of revenue from online transactions is expected to increase, impacting brick and mortar mall operators with lower rents and higher vacancies.

The hotel sector will witness several upcoming hotel openings, including The Lana, Siro Dubai, Five Luxe, Six Senses The Palm, Mama Shelter, Mandarin Oriental in Wasl Tower, and Ceil Tower.

Situated in Jumeirah Beach Residence (JBR), FIVE Luxe will include 222 rooms, 276 residential apartments, and seven restaurants

Four to five-star hotels are expected to dominate the upcoming hotel stock and local guests will remain important drivers of occupancy and revenues for affordable to mid-affordable hotels.

Expected tourist attractions include the Real Madrid Theme Park at Dubai Parks and Resorts and the inauguration of Ciel Tower in Dubai Marina, which will become the tallest hotel globally.

“Investors and buyers are advised to exercise caution, conduct due diligence, and stay informed. Government initiatives, including visas for expatriate retirees, the Green visa, and the expansion of the 10-year Golden visa scheme, are expected to attract foreign professionals to settle in the UAE, providing further support to the real estate market. However, as with any forecast, unforeseen events or changes in the future may impact the timing of these predictions,” ValuStrat analysts told Arabian Business.

In terms of the outlook for 2024, the economy is forecast to grow by 4-4.5 percent in 2024, led by non-oil sectors. Population growth sustained real estate demand.

Most real estate sectors are expected to see continued but moderate growth in 2024, with some market stabilisation and potential price corrections.

As per the report, the Dubai economy is experiencing positive growth in various sectors.

“During the first half of 2023, there was a notable surge in demand coupled with a supply shortage for larger homes in prime locations. Nevertheless, a recent shift in demand patterns has been observed, with buyers now showing increased interest in more affordable areas such as Discovery Gardens, Dubai Silicon Oasis, Jumeirah Village, Business Bay, The Greens, and Dubai Production City, where buyers are seeking lower price points and opportunities for future appreciation,” the analysts added.

This growth is attributed to government initiatives like the Golden and Green visa schemes, reforms in companies’ laws, and the expansion of start-ups and firms post-pandemic.

The demand for office space is expected to continue in 2024, particularly in DIFC and Downtown Dubai for Grade-A office spaces. Jumeirah Lake Towers and Business Bay are likely to see increased demand for smaller office spaces.

In terms of office prices and rents, capital values are projected to experience a slightly slower growth rate of 5 percent to 7 percent in 2024 compared to the previous year.

Dubai’s real estate market had a strong performance in 2023, with various sectors surpassing pre-pandemic levels, a new report by ValuStrat has revealed.

The residential market saw double-digit capital value growth across apartments and villas, the report said, adding that the ValuStrat Price Index (VPI) for Dubai’s residential market grew by 19.9 percent YoY in Q4 2023, surpassing its base level from January 2014.

Villa values grew faster than apartments and office capital values grew at the fastest annual rate since 2015, reaching 110.4 index points by Q4 2023 forecast. Rents also rose sharply across all sectors.

“The VPI is registering a widening gap between the villa and the apartment markets. The majority of villa and townhouse communities have seen capital values, more or less, double since the market trough of 2020 and have surpassed the previous peaks of 2014. The apartment market continues to witness record acceleration in capital values, though still far from previous price peaks,” analysts said.

Hotel occupancy and tourism rebounded well, with international visitor numbers exceeding 2019 levels by Q4 2023, with new hotel openings boosting the sector.

Retail sales had positive growth, though online channels gained share. New malls opened while some existing ones expanded and project launches were strong across all sectors, especially residential.

New infrastructure projects also improved Dubai’s transport network.

For a detailed perspective on the property market, visit: Dubai - Review 2023 - 2024 Outlook