DUBAI PROPERTY MARKET PERFORMANCE 2022

Big news and even bigger statistics are nothing new to Dubai’s property sector.

Dubai investors have understood for some time that the main market in the GCC may give substantial short-term growth (as seen by a 162% increase in value over the six years between 2002 and 2008 in the emerging Gold Rush) so long as they are willing to sell their positions promptly.

As a result of this turnaround, many formerly wary investors are again considering putting money into the Dubai market.

Have we seen yet another bubble? Can we confidently say that Dubai’s real estate market has entered a new age of price stability?

What's occurred with Dubai Property during the last 12 months?

In 2021, the Dubai stock market hit a new high not seen in the previous 12 years. Even in a market that has consistently set new benchmarks for success, the numbers revealed were noteworthy and could serve to whet investors’ appetites.

During 2021-2022, the industry’s sales transactions amounted to a whopping AED 151.07 bn ($41.1 bn), an increase of 110% from the prior 12 months. Between 2020 and 2021, there was a 75% increase in transactions. Not only did the market recover from the effects of the pandemic in 2021, but it also outperformed the previous year by a wide margin. The year 2021 saw a 90% increase in value and a 55% increase in volume.

Also, the secondary/completed market was 60%, and the off-plan market was 40% of the total.

Dubai Property Market in 2022

If so, did 2021’s results represent the latest boom-and-bust cycles or the beginning of a more sustainable growth curve in which investors may still get in at a low point?

It has been a year; 2022 has kept up the excellent work.

The last three months in Dubai’s real estate market have been among the greatest for investors, not just in the last 12 years.

During the first three months of the year, investors bought more than 20,000 homes in Dubai.

Apartments accounted for most of these deals, but the market saw healthy growth, with villa sales growing by 58%. Once more, it would appear that the off-plan and resale markets have investor confidence. Sales in the secondary market (resales) were up nearly 75%, and sales off the plan were up nearly 95%.

Where do you see capital values standing in the current economy? According to recent research, Villa prices have risen by 20% in the previous 12 months, while the larger apartment market is still producing substantial growth, at about 10%.

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Where are the highest price increases in Dubai so far?

The premium segment of the Dubai real estate market has seen the greatest price increases since the expansion cycle began. There has been a nearly universal double-digit increase at the ultra-prime end of the property spectrum, with some investors seeing asset prices leap by an amazing 60% in the period.

The market for homes priced at $10 million or more has experienced unprecedented levels of activity due to the rush of demand from wealthy investors and purchasers worldwide. Compared to the previous high watermark of 31 sales in 2015, 93 of these sizable properties changed hands last year.

New data from the end of the first quarter also drew attention to a select few significant regional markets. Villa prices in Palm Jumeirah rose by 5% in April alone, while those in Jumeirah rose by 3.7% and those in Jumeirah Golf Estates rose by 4.6%. Outside of Jumeriah, Al Barari was the best-performing area in April, with villa values increasing by 4.9%.

While average returns are lower in the apartment market, substantial profits can still be made. Palm and Old Town apartment owners saw their portfolios increase by 4% in April.

Will Dubai Property prices rise or fall now?

This is only Dubai’s third real estate cycle, so there is no historical evidence to compare it to. Of course, no cycle is ever the same, but there is growing confidence that the market will be less volatile and growth more sustained this time, even without Expo 2020.

A Reuters poll of 13 property market analysts acknowledged success post-Expo 2022 and post-pandemic but predicted annual average growth of 3% by 2024.

Analysts estimate the rental rate for tenanted homes to rise near to mid-term. Dubai’s rents have risen by 16% since October 2014.

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What's driving this Dubai Real Estate growth cycle?

‘Build it, and they will come been the UAE housing industry philosophy for the past 20 years. Now it seems the modus operandi is a more sustainable build-it-and-they-will-stay.

The government made it easier and more desirable for people to commit to Dubai long-term. The most notable change was the expansion of the 10-year visa program.

Golden Residence Scheme is a 10-year visa for Dubai. Updates streamlined eligibility standards and gave visa holders more privileges and flexibility. The Golden Residence amendments are outlined here, but in short, the new visa regulations allow more people to earn residency when buying Dubai property, including Off-plan and Mortgaged Properties.

Other macroeconomic and geopolitical considerations suggest prolonged growth.

UAE oil revenues will rise with world prices, but Dubai has a diversified economy. Over 95% of the UAE’s population has at least 2 doses of covid. The proactive approach has helped the emirate’s economic recovery and expedited Expo 2020 by a year. This has led to an increased revision of GDP predictions, with Dubai expected to record 6.2% economic growth this year.

Positive post-covid attitude and new visa regulations have benefited Dubai’s employment, up 3.5% in 2022.

The market is maturing. The prime submarket sets the pace with ultra-high-net-worth residents, but the entire market is desirable globally. Investors face intense competition from end-users and existing residents in Dubai’s more established neighbourhoods.

Will Dubai real estate prices rise indefinitely this time?

No. Every housing market has boom-and-bust cycles, but Dubai’s may be over. Both of Dubai’s prior 10-year cycles witnessed intra-cycle stagnation despite overall increases.

Investors are only a year into the third expansion cycle, but the ceiling is clear. Dubai real estate prices are still 25% below their 2014 peak. That’s 26% less per square foot for flats and 11% less for villas, despite the latter’s tremendous expansion in the past year.

Most end-users and investors are insensitive to pricing and value history. Under such standards, Dubai’s top waterfront property is very competitively priced.

Most of the completed and secondary stock has been purchased by high-net-worth individuals searching for a second home or relocation. This lack of inventory could boost interest in the premier off-plan market.