Dubai Faces Sharp Rent Hikes Due To Apartment Shortage

The Dubai property market is grappling with a shortage of luxury apartments, causing rental prices for high-end properties to skyrocket. Real estate experts attribute this trend to a surge in demand from high-net-worth individuals (HNWIs) moving to the emirate and a limited supply of truly luxurious options.

“We don't have many luxury apartment projects that are ready at the moment,” explained Vladimir Minaev, luxury property specialist at Metropolitan Premium Properties. “We only have four or five truly very luxurious options on the market. So when HNWIs move to Dubai, many choose to rent while they explore localities that suit their lifestyle. Since these properties are hard to come by, the rates are also quite high.”

Record-Breaking Rental Deals

A striking example of this trend is a recent rental deal involving a European HNWI family who paid an astounding AED 4.4 million for a 10,000-square-foot penthouse at The Royal Atlantis Resort & Residences on Palm Jumeirah. The penthouse, which features four bedrooms, a library, an exercise room, and comes fully furnished, set a new record as Dubai’s largest single-unit rental agreement.

The appeal of such properties lies in their high-end amenities, hotel-style concierge services, and turnkey readiness—making them ideal for renters who value luxury and convenience.

The Evolving Definition of Luxury

Rohit Bachani, co-founder of Merlin Real Estate, emphasized how the concept of luxury has shifted in recent years. “The concept of ‘luxury’ has expanded beyond its traditional meanings,” he said. “Today, it’s not just about opulence. It’s about the lifestyle, the connections, the amenities, and a strong sense of identity. The influx of HNWIs into the country is further diversifying the market.”

Supply Struggles to Meet Demand

The influx of HNWIs has created unprecedented demand for luxury apartments. However, supply hasn’t kept up, according to Jeff Raju Kuruvilla, CEO of Manifest Real Estate. “Buyers require properties in specific locations with architectural uniqueness and high-end amenities,” he said. “Although top developers launched some unique projects in 2024, it could not keep up with the demand.”

Off-plan properties in the luxury segment have been selling out within hours of their launch and are reselling at premium prices in the secondary market, added Jeff.

Limited Options and High Returns

The scarcity of rental options in the luxury segment further exacerbates the issue. “People normally don’t rent luxury properties,” noted Vladimir Minaev. “They usually buy and sell them instead. If you’re looking for villas, it’s easier to find options, but in the penthouse category, choices are very limited.”

Despite these challenges, the luxury market remains attractive to investors due to its lucrative returns. “Luxury properties are still enjoying a rental yield of 5 to 7 percent,” said Jeff. “This is attracting new investors to established areas like Palm Jumeirah, Downtown, and Business Bay.”

Additionally, branded residences have emerged as one of the most sought-after segments in Dubai’s luxury real estate market. These properties, often affiliated with globally recognized brands, offer exclusivity, prestige, and top-tier services, further elevating Dubai’s status as a hub for luxury living.

Looking Ahead

With demand continuing to outpace supply, Dubai’s luxury rental market shows no signs of slowing down. For HNWIs and investors alike, the city’s real estate sector offers both challenges and opportunities, solidifying its reputation as a global hotspot for luxury living.