Dubai shows strongest rental growth in first half of 2024: Savills

Dubai led a list of 30 markets that had the strongest rental growth during the first half of 2024, underscoring the emirate’s robust property and real estate market that has already defied expectations of a slowdown.

In the Savills Prime Residential World Cities index published on Monday, the real estate firm said Dubai was ahead with a phenomenal 12.1% rental growth, more than three percentage points ahead of Bangkok (9%) that was a new entrant to the list. Lisbon showed 7.5% growth and was placed third in the list.

Savills Plc added that average gross prime yield across the 30 markets currently stands at 3.2% across the cities, up from 3.1% in December. Overall, Los Angeles, New York, and Dubai remain the highest yielding cities with average yields above 5%.

Dubai and Lisbon have been perennial leaders for growth in their prime rental markets because of excess demand for high quality rental properties but Bangkok is a new entrant,” Kelcie Sellers, associate director, Savills World Research, was quoted as saying.

“Rental demand for prime rental property in the city has risen due to the higher interest rate environment and the return of tourism and expats after the pandemic.”

The report added that across many EMEA markets, demand continues to outstrip supply of prime rental properties which is supporting prime rental price growth across the region.

Interestingly, no EMEA market tracked in the index saw rental prices fall from December 2023 to June 2024.

Dubai’s outlook

Dubai has seen massive real estate growth and deals worth $74.6 billion were executed in 2023, according to property consultant Knight Frank LLP.

Many saw this as the peak of property demand, serving reminders of the 2008 slowdown before the first three months of 2024 saw another $24 billion worth of property changing hands.

Despite the rental growth, Dubai’s residential properties were deemed relatively affordable compared to other cities in the region, according to the ‘Global Wealth & Lifestyle Report 2024’ published by Swiss wealth management firm Julius Baer Group LTD in June.

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On the global front

Meanwhile, Athens, Barcelona, Amsterdam, Berlin, and Cape Town have all seen prime rental prices rise by more than 3% over the first half of 2024, with Athens seeing rental prices increase by 4.6% during the six-month period, added Savills.

With the residential sales market in the United States moving slowly because of higher interest rates, many prospective buyers have turned their attention towards prime rental markets in key cities across the country.

Los Angeles and San Francisco have each seen prime rental price growth of over 4% for the first half of the year. New York City is also seeing rising rents, with increases of 3.6%.

Chinese markets saw mixed performance in the past six months.

Rents in Beijing were up 1.6% in the first half of the year as economic uncertainty and the changing attitudes towards renting versus buying led to an increasing number of individuals choosing to lease residential properties. Shanghai saw modest declines in its rental pricing of -0.2%, while Guangzhou, Shenzhen, and Hangzhou saw rental price falls between -0.9% and -1.2% as the wider economic slowdown affects sentiment around the residential markets.

The report also suggested that rents are expected to continue to outperform capital values for the remainder of 2024 and in the medium-term as supply continues to remain scarce in many world cities.

“High interest rates continue to contribute to caution in the sales markets and are pushing more would-be buyers into the prime rental markets. However, the potential for interest rate cuts in the second half of the year may encourage those would-be buyers to re-enter the sales market, easing price pressures,” Sellers was further quoted as saying.

“However, supply is expected to remain tight in many world cities due to several factors, such as high construction costs and development challenges, which may mean further upward pressure on prime rental prices.”

Copyright Business Recorder, 2024