Why Rents In Dubai Are Blowing Up? Property Market Report – July 2022
The rental market in Dubai is seeing some serious growth in rental rates. A number of industry executives and analysts have expressed concern over the rapid rise of rents over the last eight years. Several new reforms introduced by the emirates, such as the Golden Visa, led to a significant increase in population after Expo 2020. Now, let’s understand the crux of it all.
Property Market Report Overview
According to the data by Dubai Land Department, a total of 71.9 billion dirhams worth of transactions occurred in 2021 between January and July. In 2022 transactions, the total volume has been 135.15 billion dirhams from January 2022 to July 2022, a nearly 88 percent increase from year-to-month transactions. The number of transactions in July specifically totaled 7163 with a volume of 20.98 billion dirhams.
Among the best months of this year, July 2022 came in second. Almost 22.5 billion dirhams worth of transactions were carried out in June 2022, followed by 21 billion dirhams in July 2022.
The average rent for apartments in Dubai had increased by 21.2 percent and the average rent for villas in Dubai had increased by 24.7 percent in the last 12 months to June 2022. Average apartment rents in Dubai were about 85000 dirhams, while Dubai villa rents were about 255,000 dirhams.
In July 2022, The top five communities in Dubai in terms of volume of transactions were Palm Jumeirah, Downtown Dubai, Business Bay, Dubai Marina, and Dubai Hills Estate respectively.
Among the most luxurious communities in Dubai, Palm Jumeirah had the highest average apartment rent in Dubai of AED218,000. As for villas, the villa community in Al-Barari, which houses some of the most luxurious villas in Dubai, the average asking rental was AED890,000 per year.
Why Are Rentals On The Rise?
Rents are increasing because of increased demand. The demand is increasing due to the population growth in Dubai. The population of Dubai stands at over 3.5 million as of July 2022. With more supply and more people moving in, there is a growing demand for housing in Dubai.
Dubai has not been affected by inflation in the same way that developed nations have. As inflation rises, rent trends will continue to rise this year and next year. There is a possibility that the demand can decrease, but it isn’t certain since so many people are interested in moving to Dubai. The rents will increase until the supply reaches a higher level than the demand.
It is projected that the rent will rise by year’s end since we are approaching the last quarter of the year. In the last quarter, there is a surge in demand as many tourists visit Dubai for the New Year Celebration and this time, the demand will go over the head because of the Qatar Fifa World Cup which is starting from Mid-November until Mid-December.
Rental Increase In Primary Communities Of Dubai
Palm Jumeirah and other primary communities in Dubai have seen an increase of up to 30%. The most demanded communities of Dubai include the Dubai Marina and Dubai Downtown.
In primary communities, rents are soaring in both short-term rentals as well as long-term rentals. Long-term is defined by the demand for rentals on an annual basis, while short-term is defined by the need for rentals within a month, one week, three months, or so. Most of the tourists look at the primary areas for their short stays to enjoy the attractions and stay closer to the city which is why the short-term demand is always on a rise in Palm Jumeirah, Dubai Marina and Downtown Dubai.
Another reason for the rental increase in these prime communities is the shortage of new supply. There are certainly some projects in Downtown Dubai but mostly handed over after 2023. Similar is the case with Dubai Marina where the demand is always high and no new development is coming up before the end of 2023.
Impact of Rental Increase on Mortgage Transactions.
According to the report by Property Monitor, Mortgage transactions have risen to 40 percent of the total number of sale transactions in July 2022 as compared to an average of 27 percent in the previous quarter. One of the reasons why Mortgage transactions in Dubai are up is possible the increase in rental prices because with the increase in rental prices, many tenants are looking to switch and become homeowners by taking a mortgage to buy the property and then pay off the monthly mortgage amount rather than spending huge numbers on the rents, hence leading to a growth in the Property Transactions and Dubai Property Market.
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