The overall Dubai Residential Price Index showed that rents rose almost 20 per cent over the last year. Apartments rents saw a larger jump as they grew 21 per cent while villa rents rose by just 10 per cent, according to the latest report by CBRE.
However, quarter-to-quarter rental growth has been more marginal at around 3.2 per cent with apartments rising by 3.6 per cent and villas by 1.4 per cent.
“The rising cost of living in the emirate continues to be a concern for many residents, with rentals having risen by an average of almost 50 per cent during the past two years,” CBRE said.
“This is reflected by the sustained flight to affordability that is taking place, with downsizing of units and relocations becoming increasingly prevalent amongst expatriates.”
Apartments in area such as Business Bay, The Greens, Sports City, International City and Motor City saw the strongest growth in rents during the second quarter of this year.
Dubai’s residential sales market also registered a consistent quarterly increase of five per cent. This indicates that the demand remains strong despite the introduction of regulatory measures such as higher transaction fees, the report said.
Sales prices grew 31 per cent from the same period last year with budget locations such as International City and Jumeriah Village Circle seeing the largest jump in prices.
CBRE also cautioned developers to monitor the rising residential supply pipeline to balance market needs.
“The residential development pipeline is still increasing, with a rising number of new projects being launched month by month. Whilst this pipeline is still far smaller than witnessed during the last cycle, it is nonetheless growing quickly and is certainly something to monitor carefully, with a danger that further down the line supply could again start to exceed demand fundamentals,” the report said.
Almost 17,000 new units are set to be completed by 2014 with the majority of these are expected to be delivered in secondary locations such as Dubailand, Jumeirah Village Circle and Silicon Oasis.
Over the next four years, around 65,000 new units will be completed, of which 83 per cent are apartments and remaining will be townhouses and villas.
“With sustained demand for both occupational and investment properties, we anticipate that residential rental and sales growth will continue throughout 2014,” said Mat Green, head of Research & Consultancy UAE, CBRE Middle East.
“However, we expect growth levels to be lower than 2013 performance as affordability becomes a more influential driver of property moves.”