Dubai: Will Soaring Rents, Property Prices Affect Residents' Cost Of Living?

(MENAFN- Khaleej Times)

As Dubai's iconic skyline continues growing, a pressing question echoes through its bustling streets: will the rise in real estate prices lead to an unsustainable increase in the cost of living?

The government of Dubai is addressing these concerns proactively with a comprehensive strategy aimed at ensuring market fairness and stability.

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The surge in property values has become a double-edged sword for the emirate. While it demonstrates Dubai's robust economy and attractiveness to global investors, it has simultaneously fuelled rising rental costs, a primary component of the cost of living that directly impacts residents' daily lives.

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However, a closer examination of data reveals a more detailed picture. Despite recent price appreciation, Dubai remains a comparatively affordable global hub when measured against other major cities.

“In Dubai, one can buy a home for one million dollars as a space, which is 58 per cent better than New York and also better than London by 65 per cent and Singapore by 55 per cent,” Omar Bushahab, Director General of the Dubai Land Department and Chairman of the Board of the Mohammed Bin Rashid Housing Establishment explained.

This came during a panel discussion at the Mohammed bin Rashid Leadership Forum 2025. The premier annual gathering, held at Dubai World Trade Centre under the patronage of Sheikh Mohammed bin Rashid, Vice President and Prime Minister of the UAE and Ruler of Dubai, brings together 1,000 key government and private sector leaders to discuss Dubai's transformation into the world's best city.

Smart Rental Index for market gaps

To maintain this competitive edge and prevent market overheating, the Dubai Land Department has introduced several innovative measures. The cornerstone of these efforts is the Smart Rental Index, launched a year ago, which has revealed significant gaps between property prices across different market segments.

“The index's measurement revealed real reflections of the government's concerns regarding the cost of living increase,” Bushahab noted.

The index has identified available options that span both luxurious and economical segments, providing a comprehensive view of the market landscape.

The government plans to expand this index to include the commercial sector, offering a more holistic view of Dubai's real estate ecosystem.“This index will be expanded to include the commercial sector and provide a more comprehensive view of real estate,” Bushahab confirmed.

The Dubai Land Department's approach emphasizes maintaining neutrality between different market participants.“Naturally, it will be measured regularly, but we must be cautious not to favor one group over another. We shouldn't prioritize the seller over the buyer; as a government, we need to remain neutral,” Bushahab emphasised.

Record-breaking market performance

The numbers speak to Dubai's remarkable market performance. By the end of August, total transactions reached approximately 595 billion dirhams compared to the previous year, representing a substantial 24 per cent increase.

The influx of new investors has been equally impressive, with 380 thousand new investors entering the UAE market, marking a 24 per cent increase. Sales transactions alone reached 414 billion dirhams, with a remarkable 43 per cent increase.

“These numbers are noteworthy compared to other governments,” Bushahab said.

Market dynamics, price trends

Recent market data confirms the continued upward trajectory of Dubai's real estate sector. Average property prices in Dubai climbed to Dh1,582 per square foot in the first half of 2025, according to Betterhomes' latest market report.

This represents a 6 per cent increase compared to the second half of 2024 and a 3 per cent rise quarter-on-quarter from Q1 2025.

Cost of living

The real estate surge has had tangible effects on the broader cost-of-living landscape . UAE employers have responded to rising residential rents by increasing housing allowances, with an average hike of 4 per cent in 2025 compared to the previous year, according to global consulting firm Mercer.

Rents across major emirates have been rising over the past four years due to an increasing population that now surpasses 11 million residents. Most communities in Dubai and Abu Dhabi have experienced rent increases ranging from high single-digit to double-digit percentages over recent years.

The 2025 Middle East Housing and Schooling Report revealed that 70% of UAE firms provide separate housing allowances, while 25% include housing within consolidated allowances. More than half of employers (52%) now provide housing allowances in advance rather than monthly, recognizing the challenge of large upfront rent payments.

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