Dubai’s Real Estate Market: Understanding the Current House Prices

The end of 2022 was extremely successful for the Dubai real estate market. It can be undoubtedly named the year of records. Read on to find out what is happening in the local housing market, how much the prices for buying and renting have risen, and what to expect in the near future. 

• Transaction Growth
• Price Rise for Luxury Housing
• Rent Growth
• Forecasts for 2023
  

Transaction Growth 

Based on a report by Dubai Media Office, the year 2022 witnessed a remarkable 76.5% increase in the value of real estate transactions, accompanied by a substantial 44.7% rise in transaction volume compared to 2021. The total value of transactions reached an unprecedented record of 528 billion AED ($143.7 billion). 

Praising the real estate sector's "exceptional performance," Crown Prince Sheikh Hamdan bin Mohammed expresses optimism that Dubai's dream of becoming one of the world's top three cities is within reach.

A recent report by CBRE reveals that December alone accounted for 8,662 real estate transactions, propelling the total annual transactions to a remarkable 90,881. This surpasses the previous record set in 2009, which stood at 81,182 transactions, showcasing Dubai's thriving real estate market in 2022.

The recent changes in visa rules, making it more accessible for foreigners to relocate to the UAE, have ignited interest in the emirate's real estate market. Coupled with the emirate's loyal financial policies, offering an appealing option for "parking the money" in a neutral country, Dubai has emerged as one of the most sought-after cities globally for investors. Consequently, the surge in demand has inevitably impacted the growth in property prices, solidifying Dubai's position as a thriving real estate destination.

Price Rise for Luxury Housing 

2022 has become a record year for the luxury sector of the market. According to Knight Frank, during this period, 219 homes were sold for prices starting at $10 million or more.

Consultants report that Dubai's elite sector experienced a substantial 50% increase in prices due to limited supply, outpacing the results of 2021. Despite this surge, the emirate retains its position as one of the most reasonably priced luxury housing markets globally, which further enhances its allure for foreign buyers.

As per Zoom Property Insights, the most sought-after areas for buying flats in 2022 were Business Bay, Dubai Marina, JVC, Downtown Dubai, Dubai Creek Harbour, and Palm Jumeirah. Notably, Business Bay took the lead with an impressive 10,300 transactions, totaling 17.6 billion AED, closely followed by Dubai Marina with 7,430 transactions.

The average property price in elite areas is 6.9 million AED ($1,88 million).

• The price rise for elite flats in December 2022: 0.6% to 1,168 dirhams ($318) per square foot ($3402 per sq. m);
• The price rise for elite villas in December 2022: 0.8% to 1,385 dirhams per sq. foot ($4,033 per sq. m);
• The annual price rise for elite flats: 9%;
• The annual price rise for elite villas: 12.8%.
  

Palm Jumeirah emerges as the most prestigious area to buy flats, commanding an average price of 2,324 dirhams ($623) per sq. foot ($6,762 per sq. m.). Notably, villa prices on Palm Jumeirah soar to 3,921 dirhams ($1,067) per sq. foot ($11,416 per sq. m.). Realtors affirm that this exclusive neighbourhood continues to shine as the "star of the city." Remarkably, villa prices witnessed a staggering 49.4% increase last year, driven by a scarcity of new waterside villa projects in completed areas.

According to Knight Frank, prices for villas in Mohammed bin Rashid City have increased by about 22% over the year and by more than 20% in Dubai Hills Estate. Flat prices have also risen in popular areas of Dubai. According to Knight Frank, Dubai Hills Estate leads with about 22% increase, followed by The Palm with 20% growth.

The price records of 2022: 

• Purchase. Dubai's most expensive deal: a villa on Palm Jumeirah sold for 302 million AED ($82.2 million). 
• Rent. A villa in the same neighbourhood was rented out for 6 months for 4 million AED ($1 million).
  

Rent Growth 

Rent growth in Dubai has also reached historic levels. According to CBRE, the rent increased by 27.1% for flats and by 24.9% for villas. Due to a lack of homes available for rent and growing demand, rental rates are now 45.3% higher than in 2019. 

The average annual rent for a villa in Dubai has reached an all-time high of 282,100 AED ($76,800), while flat rentals are also at a peak with an average of 95,100 AED ($25,900) per year. 

The positive price growth brought welcome relief to landlords who had to reduce rents for nearly six years leading up to 2022. However, the surge also resulted in a rise in tenancy disputes and eviction notices as landlords seek to capitalise on the improved market conditions.

Forecasts for 2023

Knight Frank forecasts ongoing price growth in Dubai's real estate market, surpassing leading cities like Miami and Paris in this regard. However, experts anticipate a moderation in the growth rate, particularly impacting new areas with less developed infrastructure.

In a Nutshell

The real estate market in Dubai remains stable, aligning with the objectives of the Dubai Economic Agenda, which aims to double the size of the emirate's economy by 2033. Construction plays a central role in Dubai's sustainability strategy and is a pivotal driver of the city's 2040 master plan.

Cover photo: SLS Dubai Hotel & Residences (Housearch)