Tenants increasingly move to better quality buildings and push up rents in new properties.

In the UAE, tenants are increasingly opting for higher-quality buildings which has led to a rise in rental prices for newer properties. According to experts, the average rent for a one-bedroom apartment is typically between Dh 35,000 and 40,000 annually. However, newer flats can demand a premium of at least 20% or more. This trend is driven by the increasing number of high-net-worth individuals seeking better-quality accommodations.

In contrast, older and low-quality buildings are experiencing higher vacancy rates, particularly in Sharjah.

Due to a shortage of ultra-luxury housing units and an influx of expatriates in the post-pandemic period, rental prices in certain country areas continued to rise last year. However, rents are stabilizing after significantly increasing in the past few years. According to experts, leasing activity in Abu Dhabi remains stable, with most inquiries coming from tenants seeking better-quality housing options.

Regarding specific areas, rental prices for apartments on Saadiyat Island saw the biggest increase at 36.8%, followed by Al Reem Island at 11.1% and Al Reef at 3.3%. In the villas/townhouses segment, Saadiyat Island again had the highest increase in rental prices at 36.8%, followed by Al Reef at 7.7% and Al Raha Garden at 6.9%. Rental prices in Al Raha Beach remained stable. Rental prices remained steady in Hydra Village and Gold Gardens.

According to experts, 2,000 housing units were expected to be delivered in the capital in 2022. However, they predict that a significant amount of residential supply will be handed over in Sharjah in 2023 and beyond, which could negatively impact older properties in the secondary market. The report suggests that rental values for good-quality Grade A assets will likely remain stable. Still, poor-quality older properties may experience increased vacancy levels and rental corrections as tenants and end-users move to newer developments.

In Sharjah, the neighborhoods of Al Sharq, Al Qasimiya, and Al Khan saw the highest rental increases at 25%, 22.2%, and 16.7%, respectively, while Al Majaz and Muweileh saw a 9.4% increase in rents.

Experts have noted a noticeable divide between the high-quality luxury property segment and the rest of the market. The high-end segment has experienced strong demand, with occupancy levels estimated to be over 90%. Due to this high demand, good-quality properties in this segment command a premium compared to the rest of the market. The average rent for a 1-bedroom apartment is around Dh35,000 to 40,000 per year, but newer developments can charge a premium of 20% or more.