In recent months, Dubai’s rental market has seen a vital shift, with one and two-bedroom apartments developing because of the most desirable units for tenants. This style is regularly driven through the developing cost of residing and growing apartment costs throughout the city. Many residents, from newcomers to the ones already set up within the city, are finding it tough to find an apartment that fits their budget.

As a result, smaller apartments have become an attractive and practical option, offering a balance between affordability and location. Smaller apartments have long been a staple of Dubai’s rental market, but their popularity has surged as tenants are increasingly prioritizing cost-effectiveness. The demand for these units, especially one and two-bedroom apartments, has outpaced that for larger properties in recent months.

This shift highlights the financial challenges faced by many residents in the face of rising rental costs, prompting them to downsize to maintain a more affordable lifestyle. One-bedroom apartments, in particular, are being sought after by individuals and couples, while two-bedroom apartments appeal to small families or those looking for a little more space without the hefty price tag of larger units.

Dubai: High Demand For 1, 2-Bedroom Apartments Amid Rising Rents 

A Clear Trend In The Rental Market

Recent data from the third quarter of 2024 shows that one and two-bedroom apartments now account for more than two-thirds of all rental transactions in Dubai. This marks a significant turning point in tenant preferences, with affordability becoming a dominant concern for those seeking a place to live. Over the past year, the demand for smaller units has steadily increased, particularly in areas that offer good value for money, convenient access to key parts of the city, and a range of lifestyle amenities.

Communities such as Jumeirah Village Circle (JVC), Dubai Silicon Oasis, Dubai Marina, Business Bay, and Emirates Living have emerged as prime locations for rental activity. These areas continue to attract tenants due to their combination of affordable prices, excellent connectivity, and vibrant community atmospheres. As more residents look to these locations for housing, the competition for available units has intensified, further driving up demand.

Average Rental Costs In Dubai

The continuous rise in rents has become a defining feature of Dubai’s real estate market, with rental prices across the city reaching new highs. This upward pressure on rental prices is driven by the increasing demand for one and two-bedroom apartments. As a result, rental averages for various apartment sizes in Dubai have surged. Studio apartments now average AED 38,428 per year, while one-bedroom apartments are priced at AED 58,812 annually. 

Two-bedroom apartments have an average rental cost of AED 84,589 per year. Larger units are also seeing significant increases, with three-bedroom apartments averaging AED 145,149 annually, four-bedroom apartments costing AED 242,063 per year, and five-bedroom apartments priced at AED 356,928 per year. The most significant rental costs are seen in six-bedroom apartments, with an average price of AED 793,971 per year. These rising rents reflect the growing demand for housing in Dubai, contributing to a rapidly changing rental landscape.

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Population Growth Drives Demand

Dubai’s population growth has been a key factor in the increasing demand for rental properties. Over the past four years, the city’s population has surged by over 400,000 people, reaching 3.82 million by 2024. This growth has been driven by an influx of professionals, investors, and high-net-worth individuals who are seeking to make Dubai their home. As the population continues to expand, the demand for housing has followed suit, placing additional pressure on the rental market.

A Booming Real Estate Market

Dubai’s real estate market remains one of the most dynamic and attractive in the world, thanks to the city’s robust infrastructure, a diverse expatriate population, and ambitious development projects. These factors have positioned Dubai as a global leader in property investment, with rental yields that are among the highest globally. Current rental yields in Dubai can reach up to 7.0 percent.

This strong performance in the real estate market has attracted both local and international investors, contributing to the ongoing demand for rental properties. As a result, the supply of rental units has struggled to keep pace with demand, making it even more difficult for tenants to find suitable housing within their budget. 

Arshad Darbar’s Thoughts 

Arshad Darbar, a professional real estate expert with years of experience in the Dubai market, views the growing demand for one and two-bedroom apartments as both a challenge and an opportunity. According to Darbar, the current trend reflects the changing dynamics of the Dubai rental market, where affordability is becoming a key concern for many tenants. He believes this shift is a response to the rising cost of living, which has made it increasingly difficult for renters to find larger, more expensive properties within their budget.

Darbar also emphasizes that the growing demand for smaller apartments presents a unique opportunity for developers and investors. By focusing on the construction of one and two-bedroom units in areas with strong rental demand, they can tap into a market that is increasingly seeking affordable living options. Darbar predicts that this trend will continue as Dubai’s population grows and more residents look for cost-effective housing solutions.

While the demand for smaller apartments is likely to remain high, Darbar also notes that tenants will need to remain adaptable. As the market continues to evolve, new communities and developments may emerge, offering more affordable housing options without compromising on quality or location.

Conclusion

The rising demand for one and two-bedroom apartments in Dubai reflects the growing need for affordable housing amid rising rents and population growth. Smaller units have become an attractive choice for tenants seeking to balance cost with location and amenities. As Dubai’s rental market continues to evolve, this trend is likely to persist, offering opportunities for developers to meet the demand with more affordable housing options. 

With competition among tenants increasing, smaller apartments will remain a popular solution, ensuring they play a significant role in Dubai’s dynamic real estate landscape for the foreseeable future.