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After a 2-yer hot streak of 15-35 per cent rent gains, some cooling off for villas was inevitable. That's starting to show up in the Ejari contracts. Image Credit: Shutterstock

Dubai: Some cooling off in rental values is starting to show up in Dubai’s villa communities after two years of super-hot gains in 2021-22. This trend, based on the Ejari contracts with the Dubai Land Department, is limited to select locations, with market sources saying that some slowing down was to be expected.

“Rents are falling in both renewed and new Ejari contracts, as the market cools own from some of the exceptional growth seen in 2021 and 2022,” says a new report from the Reidin-GCP combine.

Starting 2021 and all through 2022, Dubai’s property market had seen a 15-30 per cent increase in rental values, but much more so in the prime/super-prime villa communities. Homes on the Palm and Dubai Hills Estate were the biggest beneficiaries of this trend.

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Deira rental dips

Villa rental movements in Deira have seen a bit of a ‘struggle’, with 4-, 5- and 6-bedroom homes lower by between 5-15 per cent based on the Ejari contracts. Current rental listings at a popular portal show a 5-bedroom unit in Deira’s Al Baraha neighbourhood asking for Dh220,000, while that on a 7-bedroom home in Al Wuheida is Dh365,000. (There are also 3-bedroom units in Hor Al Anz with a Dh80,000 rental tag.)

Even Palm shows a decline

When it comes to super-prime residential locations with the biggest increases in property value and rentals, the Palm remains the champion. But even there, Ejari contracts in the year-to-date point to a 15.89 per cent dip in rental values – but only in the 6-bedroom category.

How’s the wider villa market performing?

“Similar to apartments, newer Ejari contracts have seen superior price appreciation almost across the board,” says the Reidin-GCP report. “Newer communities have performed better in most instances, with some notable exceptions.

“However, this year has seen prices start to moderate, and even fall in some communities. This may be a sign of market stabilization.”

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Big gainers

Outside of the Palm, Dubai Hills and Emirates Hills, best-performing villa rental locations list The Springs and Arabian Ranches, as well as Town Square and those in the Bur Dubai neighbourhood. But right at the top with the highest rental gains based on Ejari data are those in Mirdif and Damac Hills 2. Villas in Mirdif, in 4-bedroom and over formats, carry lease rates of Dh240,000-Dh320,000 after a nearly 13 per cent increase year-to-date.

This year, “Dubai Hills Estate has continued its strong performance, with its 32.16 per cent being the most average price appreciation (as of July 31) of any villa community.

“Emirates Hills features for the fourth consecutive year, but super-prime villas continue to be a minority among the top performers.”

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What next for villas?

More newly completed villas should be ready at MBR City, Dubai Health Care City and Dubai South, and many of these could be placed in the rental market. Multiple industry sources insist that there just aren’t enough villas around to feed demand. New villa-dominated projects from Emaar, Sobha and others are still some distance away from their completion dates.

As of now, it’s the new communities that are driving the villa rental dynamic. These have ‘consistently shown greater performance than their older counterparts, especially in 3-bedroom villas,” states Reidin-GCP.

“Overall, newer communities have seen better price performance in every year except 2020…”