05-05-2025
Dubai rents: Are short-stay rates seeing a slow down for property investors and landlords?
Dubai: The number of new residential units being added to Dubai's short-stay rental markets continue to rise – but landlords will do well to keep close check on the kind of rates they are being leased for. They need to because the other option – leasing their properties for one-year contracts – is still recoding sizable increases in rates.
There was a wakeup call of sorts for short-stay favouring landlords during the period leading up to the Eid break in late March.
'The short-stay rental/holiday home market was looking at a drop of about 15% on ADR (average daily rates) and a reduced occupancy of 20%-25%,' said Vinayak Mahtani, CEO of the property leasing and management company bnbme. 'The main reason for the drop in rates was that a lot of UAE residents – who would typically opt for staycations during Eid breaks – preferred to travel out this year.
'There was another reason for the impact on demand - the increase in number of short-stay units in Dubai. Then, it created a situation where demand did not end up following the actual increase in supply.'
Dubai's short-stay rental market had been hitting high growth for the better part of three years. Not just as holiday homes, it was seen as offering the ideal platform for new residents in the city to stay and explore all the housing options available for annual leases. Plus, of course, there was the consistently high demand from business travellers to Dubai, and which still represent a sizable chunk of demand for short-stays.
So much so, even when Dubai's 1-year rental rates were growing in double-digits, there was a steady stream of landlords who kept putting their properties for short-stays. What they were looking for was a steady rise in income with fewer vacant days between people renting. And most landlords were getting that.
More properties, slower rent increases
Then, by mid-2024 onwards, short-stay leases started feeling pressure of the sheer number of new units that were made available. 'By February 2025, it was clear that rate gains were slowing down, and there were also longer vacancies between short-stay leases,' said a rental manager at a leading property management firm. 'Some of the landlords we were representing got quite irritated by the drop in their returns.'
Some landlords took the next obvious step – of pulling out all of their properties in the sort-stay market. 'In January, I decided it was better to put all my units in the 1-year rental space,' said a property investor. 'I shifted 6 units in all from short rentals, and I have not regretted the decision.'
But for every landlord that exits, there are others who want a feel for the short-stay rental opportunities. According to various estimates, an average daily short-stay rental rate in some of Dubai's prime locations would be $100-$250, while rising significantly during peak seasons such as during Eid and closer to the city's New Year festivities.
What will landlords get on 1-year rentals?
Dubai annual rents are still trending on the higher side, with January's introduction of the digital Rental Index adding another facet to what landlords can demand – and get. For tenants, that has meant sign up for renewals at the 'new' average rentals for that area/building, which means paying higher.
According to the latest market update from the property consultancy CBRE, the year-on-year average increase in Dubai residential rentals (the 1-year lease sort) is around 11%.
This is part that excites landlords considering a switch from leasing short-term to a 1-year. Some of them would have made their decisions by late summer, which is when typically the market sees a good number of tenants having to decide whether to renew or move out.
'Summer 2025 will be a defining period for many landlords wanting to choose between long- or short-lease markets,' said a property manager. 'Unlike with short-stay rents, Dubai's 1-year rental market has not had a real slowdown in rental growth so far.
'There will be more homes that will get completed in the coming weeks and months, a sizable number of which will end up in one or the other leasing market. Landlords have to decide what sort of rentals they are comfortable with…'
