The biggest winners were prime areas like Business Bay and Dubai Marina, where rental rates surged driven by young professionals seeking proximity to Dubai’s financial districts. Meanwhile, areas like International City and Discovery Gardens saw rents tumble as regulatory crackdowns and increased competition took their toll.
“Business Bay saw rental rates increase in H1, driven by high demand from young professionals and its proximity to Downtown Dubai and DIFC,” said Ronan Arthur, Director and Head of Residential Valuation at Cavendish Maxwell.
“Dubai Marina also saw rates increase, supported by continued demand for waterfront living, proximity to the beach and JBR.”
Luxury villas dominate rental growth
Luxury villa communities dominated the gains, with properties in Emirates Hills, Jumeirah Golf Estates, and Dubai Hills Estate recording rental increases of up to 11 per cent, according to Andrew Cummings, Head of Residential Agency at Savills Middle East.
Some high-end properties experienced rent hikes as dramatic as 53 per cent, based on Bayut’s market data.
“Mid-market apartments in Dubai Marina, Downtown Dubai, JVC and Dubai Hills Estate recorded the strongest growth in H1 2025, with luxury villas in Emirates Hills, Jumeirah Golf Estates, and Dubai Hills Estate up by around 18-45 per cent in sales prices and villas seeing up to 11 per cent rental increases,” Cummings said.
Dubai Hills Estate emerged as the standout performer in the luxury villa segment, with 6-bedroom properties seeing a staggering 52.5 per cent increase in asking rents to AED 2.31 million annually. The community benefited from increased inventory in premium sub-areas like Palm Hills, Maple and Golf Place Terraces.
In the affordable apartment segment, Bur Dubai topped rental searches with studios averaging AED 66,350 annually, whilst 2-bedroom units reached AED 80,000. Arjan also proved popular for budget-conscious tenants, with 1-bedroom apartments averaging AED 52,000 and 2-bedroom units at AED 77,000, according to Bayut’s latest report.
Budget areas face sharp corrections
Not all areas shared in the prosperity. International City and Discovery Gardens experienced notable rental declines during the first half, which Arthur attributed to recent regulatory crackdowns on subletting and increased competition from higher-quality nearby units.
“Increased supply, particularly in mid-market and budget-friendly neighbourhoods, has intensified competition among landlords, resulting in more competitive pricing,” he added.
In the mid-tier villa segment, Al Furjan saw some of the steepest drops, with 5-bedroom properties falling 12.9 per cent to AED 319,000 annually and 4-bedroom units declining 4.92 per cent to AED 234,000.
Certain areas in Jumeirah Village Circle also reported decreases of up to 13 per cent for specific property types.
Dubai’s Smart Rental Index caps extreme increases
The introduction of the Dubai Land Department’s Smart Rental Index in January 2025 has begun to show its impact in the market by limiting extreme rent increases.
The artificial intelligence-powered tool uses multiple data points including rental contract values, area averages, and building classifications to determine fair rental adjustments whilst requiring landlords to provide 90 days’ notice for increases.
“The DLD Smart Rental Index, launched in January 2025, is beginning to limit extreme rental hikes, especially in communities with higher vacancy or ageing stock,” Cummings noted. “This is creating a more data-driven, transparent negotiation environment for tenants and landlords alike.”
The tool has provided tenants with leverage to challenge unjustified hikes whilst encouraging more transparent negotiations between landlords and renters.
“The index has helped stabilise rental prices, mitigate inflation, and support a balanced cost of living. It has also enhanced market transparency, enabling both landlords and tenants to make informed decisions based on standardised data and fostering greater trust in the rental market,” Arthur explained.
“Tenants have successfully used the index to challenge unjustified rent hikes, leading to fairer rental agreements and reduced conflicts between landlords and tenants.”
Short-term rentals drive prime area prices
The Airbnb effect has become a major factor driving rents higher in prime locations. Short-term rental conversions have tightened long-term supply in Dubai Marina, Business Bay, and Jumeirah Village Circle, pushing up rates for traditional tenants.
“Short-term rentals have kept rents elevated in areas like Dubai Marina, Business Bay, and JVC by reducing long-term supply and increasing demand for furnished, flexible units,” Cummings explained.
Arthur noted that areas where landlords convert units to short-term rentals see reduced availability for long-term tenants, driving up rents and making it harder for tenants to find affordable housing.
The rental market’s performance comes amid broader strength in Dubai’s property sector, which defied the usual summer slowdown in July with new rental contracts climbing 12 per cent from June, according to recent Dubai Land Department data. The surge was reportedly driven by families and professionals relocating ahead of the new academic year.
Market data from Betterhomes showed 39,251 rental transactions in July alone, with new contracts accounting for 40 per cent of deals – up from 37 per cent in June.
Supply pipeline to moderate growth
Industry experts predict the divergent trends will continue, with prime areas facing further pressure from short-term rental conversions whilst communities with large completion pipelines may see relief.
“Areas like Dubai South, Emaar South, and The Valley, which are currently attracting tenants due to their affordability, are likely to see further rental increases as demand rises and supply tightens,” Arthur said.
Conversely, he expects rental prices may moderate in developments within Jumeirah Village Circle and Business Bay, where high volumes of newly completed units are entering the market.
“One crucial point for landlords: dead occupancy is expensive. Being inflexible on pricing can result in longer vacancy periods, especially in a market where tenants have more options,” said Cummings.
