More than one-fifth of Dubai’s residential rental transactions in the third quarter of 2026 were agreed at rates below those of the previous contracts, according to the latest report by property consultancy Cavendish Maxwell. An increase in the supply of new homes has strengthened tenants’ bargaining power and slowed rental growth across the city’s housing market.

According to the report, rents declined from the previous contract in 21.4% of rental transactions recorded in the third quarter of 2026, up from just 4.8% in the first quarter of the year.

A further 38.7% of contracts were renewed with no change in rent, while the share of contracts involving rent increases fell from 59.4% in the first quarter to about 40% in the third quarter.

Cavendish Maxwell said the changes indicated that landlords had less scope to raise rents, giving tenants greater opportunities to negotiate contract terms.

Dubai rental growth slows

According to the report, average annual residential rents in Dubai reached AED 77.3 per square foot in September 2026, up 5.5% from the same period a year earlier.

However, rental growth slowed significantly, compared with an annual increase of 11.5% in September 2025.

The figures show that although average rents remain higher than a year ago, the pace of growth has eased, with some contracts recording outright declines.

Average rents declined in the second quarter of 2026 before rising again in the third quarter and returning to the level recorded in March 2026.

More than 172,000 rental contracts were registered in Dubai during the third quarter of the year.

Of these, 94,300 were lease renewals, down 10.6% from the same period a year earlier.

By contrast, the number of new rental contracts rose 18.2% year-on-year to 77,700.

Cavendish Maxwell analysts expect the growing supply of homes to place further pressure on rental growth in the coming months, particularly in the apartment market, which accounts for the largest share of newly completed units.

Which Dubai areas offer the highest rental yields?

According to Cavendish Maxwell, average annual gross rental yields in the third quarter of 2026 stood at 6.6% for apartments and 4.9% for villas and townhouses.

Gross rental yield measures annual rental income as a proportion of a property’s value before expenses such as maintenance and building management fees are deducted.

The apartment yield was slightly lower than in the same period a year earlier, but Cavendish Maxwell said it remained attractive compared with many major global housing markets.

Among Dubai’s communities, Dubai Investments Park recorded the highest apartment rental yield at 10%.

It was followed by International City at 9% and Dubai Production City at 8%.

In the villa and townhouse segment, Dubai Industrial City ranked first with a rental yield of 6.5%.

Jumeirah Golf Estates followed at 5.8%, while DAMAC Hills 2 recorded a yield of 5.7%.

38,000 new homes delivered in first nine months

One of the main factors reshaping Dubai’s rental market is the significant increase in the supply of new homes.

According to Cavendish Maxwell, about 38,000 new residential units were completed and delivered in Dubai between January and the end of September 2026.

The figure was up 41.4% from the same period in 2025 and exceeded the total number of units delivered in each of the full years of 2023 and 2024.

About 12,400 new homes were delivered in the third quarter alone.

Under announced schedules, a further 24,400 units are due to be delivered in the final quarter of 2026.

However, based on previous project completion trends, Cavendish Maxwell expects actual deliveries during the period to range from 7,300 to 12,200 units.

The supply pipeline is set to expand further in the coming years, with 136,100 units scheduled for delivery in 2027 and 155,700 in 2028.

A total of 291,800 homes are scheduled for delivery over the two years, although the final figures will depend on the pace of project development and completion.

Ronan Arthur, director of residential valuation at Cavendish Maxwell, said the decline in new project launches showed that developers were becoming more cautious amid regional uncertainty, which had delayed the launch of some developments.

He added that despite the decline in new project launches, the number of units scheduled for delivery over the next two years remained substantial.

Arthur said the market’s ability to absorb the new supply would depend on factors including population growth, household formation, employment opportunities and investment demand.

Dubai home sales and prices decline

The Cavendish Maxwell report also showed that activity in Dubai’s residential sales market declined in the third quarter of 2026.

A total of 33,900 residential transactions worth AED 72.6 billion were recorded during the period.

The value of transactions fell 13.2% from the second quarter, while transaction volumes declined 2%.

Compared with the same period a year earlier, transaction value dropped 47.6% and transaction volumes fell 38.6%.

This brought the number of residential transactions in Dubai to its lowest quarterly level since the first quarter of 2024.

The average residential sales price stood at AED 1,644 per square foot in September 2026, down 2.2% from September a year earlier.

According to Cavendish Maxwell, this was the first annual decline in average residential sales prices since the market began recovering from the Covid-19 pandemic.

Annual price growth had turned negative in August, although the average sales price in the third quarter edged up 0.3% from the second quarter.

Off-plan sales decline as ready-property transactions rise

Off-plan property sales accounted for 72.2% of all residential transactions in Dubai during the third quarter of 2026.

About 24,500 off-plan transactions worth AED 47.1 billion were recorded during the period. The number of transactions was down 41.9% from the same period a year earlier.

By contrast, transactions involving ready homes rose 19.7% from the second quarter to 9,400.

Despite the quarterly increase, ready-property transactions remained 28% below the level recorded in the third quarter of 2025.

Commenting on market conditions, Ronan Arthur said transaction volumes had declined over the past four quarters following two years of sustained growth in sales activity.

He added that transaction volumes in the third quarter of 2026 had fallen to their lowest level since the first quarter of 2024 and were more than 38% below the peak recorded in the same period a year earlier.

Arthur said regional tensions continued to affect investor confidence and buyer sentiment, resulting in a more cautious investment environment in the property market.

Dubai’s busiest areas for home sales

Dubai South led the off-plan apartment market with 4,776 transactions recorded in the third quarter of 2026.

The area recorded more than 2.5 times the 1,865 transactions registered in Downtown Jebel Ali, which ranked second.

Azizi Milan followed with 1,283 transactions, Jumeirah Village Circle with 1,153 and Dubai Residence Complex with 946.

In the ready-apartment market, Jumeirah Village Circle retained the top position with 1,111 transactions, about double the 555 recorded in Business Bay.

In the off-plan villa and townhouse segment, Sobha Sanctuary ranked first with 282 transactions.

In the ready villa and townhouse market, DAMAC Lagoons recorded the highest number of sales, with 211 transactions.

Luxury home transactions fall by more than 40%

Dubai’s luxury property market also recorded a decline in transactions during the third quarter of 2026.

In the segment covering homes priced at AED 20 million and above, 257 transactions worth a combined AED 9.6 billion were recorded.

The number of transactions fell 40.5% from the same period a year earlier.

In the ultra-luxury segment, covering properties priced at AED 50 million and above, 42 transactions worth a combined AED 3.4 billion were completed.

Nine properties were also sold for more than AED 100 million each.

Sharp decline in new property launches

The Cavendish Maxwell report also highlighted a significant decline in the number of new residential projects launched in Dubai.

Developers launched 48 new projects comprising 15,300 residential units in the third quarter of 2026.

The number of projects fell 72.7% from the same period a year earlier, while the number of units launched declined 62.9%.

However, the number of new units launched more than doubled compared with the second quarter.

A total of 190 projects comprising 49,800 new residential units were launched during the first nine months of 2026.

This represented a 67.7% decline in the number of projects and a 65.5% drop in the number of units compared with the same period in 2025.

Cavendish Maxwell said developer caution and uncertain regional conditions had delayed the launch of some projects.

The company expects downward pressure on residential sales prices to continue through 2027, while rental growth is projected to slow further.

However, the future direction of Dubai’s housing market will depend on factors including actual delivery levels, population growth, housing demand, and broader economic and investment conditions.