ROI and Rent Rates
Dubai’s residential real estate market attracts property investors from all over the world. This is due to the fact that rents have been increasing steadily for a number of years. The average rent in this city is 77 AED ($21) per square foot a year or 828.5 AED ($225.6) per square metre a year.
In the most popular Dubai neighbourhoods, rent is almost twice as high as the average rate. Rent for villas in Palm Jumeirah has skyrocketed, having grown by almost 44% in the last 12 months and by more than 92% since the beginning of the pandemic. The current rent here is 141 AED ($38.4) per square foot a year or 1509 AED ($411) per square metre a year.
The average yearly return on property investments in Dubai varies between 3% (long-term rent of villas and townhouses) and 13% (short-term rent in neighbourhoods that are popular among tourists).
An Increase in Housing Prices
Dubai is an ideal location for property investment for investors who plan to resell at a later date. Since the Covid-19 pandemic, prices for both residential and commercial real estate have been growing steadily.
In 2022, prices for properties under construction increased by 10% and secondary market prices rose by 16.8%
The situation in the premium segment is dramatically different. The prices for elite housing in Dubai’s best neighbourhoods have grown by 89% in the last five months but it's worth mentioning that they started from a low base. Average sale prices now start at 3,220 AED ($870) per square metre, making the local real estate market one of the most accessible in the world.
If we consider prices in the city, they are generally 21.4% lower than their last peak value in 2014, which means there is potential for growth.
Photo: Piotr Chrobot (Unsplash)
Demand for Residential Real Estate
Interest in villas and townhouses has continued to grow since the end of the pandemic. It increased by 20% in 2022 and the number of property deals reached 61,241, having broken the 2014 record. More than 60% of these sales involved finished residential estates, while the remaining 40% were off-plan (unfinished) properties.
Sales of premium-class houses (worth more than $10 million) reached a record number in 2022: 152 sales from January to September 2022, compared to 93 in 2021, which had also been a record in premium segment sales.
In 2023, the overall buyer demand for residential real estate in Dubai is forecast to see growth of 5.5%.
The State Housing Programme
The Sheikh Zayed's Housing Programme (SZHP) was created in 1999. It offers interest-free 25-year loans to low-income citizens. Orphans, widows, elderly people, and those with special needs are the priority of the programme.
In February 2022, the UAE government allotted to SZHP a budget of 12 billion AED ($3.26 billion). In May 2022, the Federal National Council (FNC) announced that 9500 new homes are being built for UAE citizens within the framework of the programme.
36,000 houses with a total cost of 41 billion AED ($11.16 billion) have been built for UAE citizens by the programme since its launch in 1999. In late 2021, more than 86% of UAE citizens owned properties constructed by the programme, which is one of the highest numbers in the world.
Photo: Amir Hanna (Unsplash)
The state programme only applies to UAE citizens but the programme shows that residential construction is one of the emirate’s priorities. This, in turn, creates additional opportunities for investment.
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In a Nutshell
To sum up, the main trends of the UAE’s real estate market are: high demand for houses and apartments of all categories, record numbers of residential property sales, and, consequently, an increase in prices in every segment. However, by global standards, properties in the UAE can be considered reasonably affordable.
Cover photo: Jumeirah Living Business Bay
