In the first quarter of 2021, Dubai residents experienced an 11% year-on-year decrease in rental prices, attributed to intense competition in the residential market, according to recent data released on Monday.

ValuStrat’s Dubai Real Estate Review for Q1 2021 revealed that residential rents remained relatively stable compared to the previous quarter, with a marginal decrease of less than 1% during January-March. The report also highlighted a 3.9% year-on-year increase in villa rents.

The average rents for residential units in Dubai held firm at Dh76,910 during the first quarter. The report stated that tenants paid an average of Dh55,000 for apartments and Dh211,485 for villas across Dubai.

Dubai’s residential net yields averaged 6.1% during the quarter, with apartment yields remaining steady at 6.4% and villas at 4.9%. The data indicated an 80% occupancy rate for residential properties during the quarter.

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For 2-bed villas, average yearly rents were Dh103,000, while 3-bedroom and 4-bedroom villas were available at Dh150,000 and Dh212,000, respectively.

The report detailed that Dubai tenants paid an average of Dh35,000 yearly to rent studio apartments, Dh52,000 for one-bedroom, Dh78,000 for 2-bedroom, and Dh114,000 for 3-bedroom apartments.

Expo Impact on Rent: Industry experts anticipate a potential increase in residential unit rents in Dubai in the second half of the year, leading up to Expo 2020 in October. Rizwan Sajan, founder and chairman of Danube Group, believes that rental rates and all asset classes will experience pressure throughout the year until the economy regains stability post-pandemic.

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Imran Farooq, CEO of Samana Developers, suggests that the recent trend of rising rents in villas and townhouses will transform into a broader recovery due to the scale of the six-month-long Expo 2020.

Haider Tuaima, head of Real Estate Research at ValuStrat, stated that rents may increase in certain areas ahead of Expo 2020, with the expectation of overall stability in average citywide rents for the remainder of the year. However, there might be pockets of increased asking rents in well-established locations.

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Record Sales Transactions: ValuStrat reported the highest number of home and office unit transactions in the first quarter, noting that the residential ValuStrat Price Index (VPI) saw quarterly improvements for the first time since 2014. Residential VPI showed an average quarterly improvement of 0.8%, with all settled freehold villa locations witnessing capital value improvements.

Despite improvements in certain areas, citywide residential capital values were 10.9% lower than the same period last year. The report highlighted positive trends in investor confidence, increased demand, record numbers of registered title deeds, and a gradual return to previous peak levels.

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The office sales transaction volumes surged 41% quarter-on-quarter and soared 45.7% year-on-year, indicating improved buyer confidence in the Dubai residential market. Declan King, Managing Director and Group Head of Real Estate at ValuStrat, mentioned the influence of the Covid-19 crisis on housing requirements and undersupply in some communities as contributing factors.

Conclusion: The Dubai real estate market shows signs of resilience and recovery, with fluctuations in rental prices, increased sales transactions, and positive trends in investor confidence. As the city prepares for Expo 2020, stakeholders anticipate potential shifts in rental dynamics, highlighting the dynamic nature of Dubai’s real estate landscape.