After the excess supply during the pandemic, and a corresponding severe downturn in demand and prices, the Dubai property market is recovering rapidly, facilitated by general economic growth due to rising energy prices. The market has also been affected by capital flows from foreign investors who have taken an active interest in local housing after Dubai was one of the first to lift anti-COVID restrictions. Due to global geopolitical developments, the main trend in 2022 was arguably robust growth in external demand for real estate, which has reached record levels.
Growing Demand for Housing
The current situation on Dubai’s real estate market is described by experts as ‘hot’. Dubai Land Department reported the highest number of deals in one quarter for ten years, with 22,500 properties sold in Dubai in Q2 2022 for AED 59.1 billion (USD 16.1 billion).
The emirate and its capital embody innovative urbanism, luxury and oriental flavour. Today it a rapidly developing region, where there has been an unprecedented increase in housing prices. Dubai is acknowledged to be the perfect place for investments.
In terms of real estate, flats attract the most demand in Dubai. In November 2022 alone, approximately 8,000 deals were signed in this segment, while sales increased by almost 75% compared to the same month last year.
Appeal for Investors
Affluent real estate buyers in Dubai are attracted first and foremost by the living conditions and local legislation which makes it easy to do business. There is no annual real estate tax in the UAE, just as there are no inheritance or gift taxes. It costs less to maintain a property in Dubai than in most metropolises: depending on the type of housing type, the rate ranges from AED 3 (USD 0.8) to AED 30 (USD 8.2) per square metre per month.
Moreover, since April 2022 it has become easier for investors to get long-term visas. For example, a ten-year Golden Visa is now granted to buyers of real estate which is valued at AED two million (about USD 545,000). The degree of completion of the property is not relevant here; it may still be under construction or be pledged to a local bank. However, it goes without saying that one key factor is attracting investors: rising real estate prices.
New buildings in the UAE
What is Happening to Housing Prices?
The recovery in demand has led to a steady increase in Dubai property prices. Whereas the housing cost index contracted on average by 6% in 2020 and by 2% in 2021, the prices of all types of real estate increased in 2022. Flat prices increased on average by 25% since the beginning of the year, whereas the cost of villas in prestigious neighbourhoods (such as Emirates Living, Dubai Hills Estate, Arabian Ranches, etc.) doubled.
Dubai housing prices:
- The average cost per square foot (about 0.09 square metres) of residential real estate equals AED 1,300 (USD 353.9).
- The average cost of a completed flat equals AED 1.9 million (USD 517,000).
- The average cost of a flat under construction equals AED 1.6 million (USD 436,000).
- The average cost of a completed villa equals AED 2.5 million (USD 680,100).
- The average cost of a villa under construction equals AED 2 million (USD 544,000).
We provide an example of the price of a standard flat: a completed flat over 163 metres with a swimming pool on sale in the premium 1/JBR high-rise block of flats for AED 6,955,000 (USD 1,906,0581).
The price range for villas is enormous, with the most expensive housing reaching unprecedented levels. For example, a villa was listed in the Luxhabitat Sotheby's International Realty auction at a cost which is staggering even against the backdrop of similar luxury properties: AED 190 million (USD 51.7 million). The property is located in Emirates Hills, a district which is extremely popular with wealthy expats, sometimes referred to as ‘Dubai's Beverly Hills’. The villa is 30,000 square feet (2,800 square metres) in size. It has six bedrooms, a home cinema, an eight-metre chandelier in the living room, while a 50-year-old bonsai is indicated as a special feature of this exclusive property.
According to market analysts, flat prices will continue to rise in the near future, although at a somewhat slower pace – in 2023 it might come to about 3% year-on-year. Property developers will not inflate prices too much owing to the abundant supply of real estate on the market.
New Construction: What the Future Holds for Buyers
Today, the residential real estate market looks promising for its participants: property developers in Dubai are successfully completing properties, thereby increasing supply. In the first quarter of this year, 6,000 flats and 260 villas were put on the market; according to the results of the second quarter, the number of flats available on the market reached 7,000, while the number of villas increased to 520. By the end of the year, the supply of flats on the primary market is projected to reach 22,000 and villas – 3,300. New housing supply tends to be in trendy venues, such as Damac Hills, Dubai Hills Estate, Wasl Gate, and Port De La Mer. Experts expect the residential sector in Dubai to continue to grow in terms of both volume and cost per square foot as it has not yet reached peak values.
In a Nutshell
The Dubai housing market is currently experiencing an unprecedented boom. Investments in real estate here are considered highly profitable, facilitated to a large extent by the initiatives of the local authorities to attract foreign buyers. In the near future, many new projects in different categories will enter the Dubai market. The explosive price growth is likely to slow a little. However, the purchase of real estate for living or as an investment will remain attractive.
Cover photo: Asifgraphy (Pexels)