Delivery of new units in the markets is giving tenants options to move to new areas in the outskirts.
Dubai’s Lease Renewals and New Tenancy Contracts See Narrowing Gap
The difference between lease renewals and new tenancy agreements in Dubai is gradually shrinking.
Real estate professionals highlight that while many tenants still prefer to renew their leases due to the rising rental costs, the availability of newly delivered residential units in the market is encouraging some to explore fresh options, particularly in the outskirts. This trend is contributing to the narrowing gap between lease renewals and new contracts.
“Although tenants generally lean towards renewing their leases to avoid the higher expenses tied to new contracts, this preference is decreasing. The continuous launch of new projects on the city’s outskirts offers competitive rental rates and larger living spaces,” stated Matthew Green, MENA head of research at CBRE.
He further noted that new residential developments are increasingly appealing to tenants seeking cost-effective options without sacrificing space or amenities.
“Despite rapid growth in new project launches, the leasing sector will likely face a supply shortage in the near term, with fewer than 25,000 units expected to be completed in 2024 and around 45,000 projected for 2025. This comes amid significant population growth, with Dubai’s total population reaching 3.8 million,” Green explained. He also predicted a notable surge in new unit deliveries from 2026 to 2028 as development activity peaks.
Prathyusha Gurrapu, director and head of research and consultancy at Cushman & Wakefield Core, anticipates a gradual easing of rental rates as new housing supply enters the market. Additionally, the recently launched Smart Rental Index is expected to help balance rental prices between new and renewed leases.
Data from the Dubai Land Department shows that rental contract registrations grew by 7% year-on-year in the fourth quarter, with lease renewals rising by 9% and new contract registrations increasing by 5%.
According to Betterhomes, 2025 is set to witness a record-breaking handover of 72,365 residential units—a remarkable 171% surge compared to previous years.
CBRE’s report indicated that rental rates continued to rise in 2024, with apartment rents increasing by 16% and villa rents growing by 13%.
“Rents are expected to continue their upward trend in the coming year due to limited housing supply in key communities,” CBRE added.
The introduction of the Smart Rental Index by the Dubai Land Department (DLD) in January is aimed at enhancing rental calculations. This new system is designed to provide a more accurate reflection of a unit’s features, ensuring fairer assessments of rental values.
Market Cooling Measures
CBRE has praised the UAE Central Bank’s decision to regulate lending practices related to transactional fees, such as the 4% DLD registration fee and other mortgage-associated costs.
“This regulatory step is timely, considering the noticeable surge in speculative activities. Off-plan transactions accounted for 70% of all real estate sales in 2024, marking a cyclical high in Dubai’s property market,” the report stated.
Dubai’s real estate transactions hit a historic peak in 2024, prompting regulatory measures to prevent the market from overheating. Residential property transactions reached nearly Dh434 billion—a significant 33% increase—fueled by attractive payment plans offered by developers.
Moreover, several developers are implementing stricter payment terms to help stabilize the market.
“Developers are now adopting more aggressive payment strategies, demanding larger upfront payments and scheduling the majority of payments during construction rather than upon project completion,” CBRE observed.
According to Savills, Dubai’s real estate sector is set to maintain its strong growth trajectory in 2025.
“The key trends from 2024, such as robust investor confidence, a growing appetite for off-plan properties, and heightened interest in luxury homes, are likely to continue. Overall, 2025 is expected to be another vibrant year for Dubai’s residential real estate, presenting exciting opportunities for both end-users and investors to leverage the city’s rapid development,” Savills concluded.
