Review of the year 2022
According to Property Finder's latest Zeitgeist 2022 Report, the Dubai real estate market experienced another record-breaking year in 2022. By November 2022, over 88,000 sales were recorded with a total value of AED 83 billion. The value of off-plan transactions accounted for 44% of the total. (In the previous year, the approximately 60,000 transactions reached AED 44 billion).
Among these, the most sought-after villa and residential districts were Palm Jumeirah, Downtown Dubai, Jumeirah Village Circle (JCV), Jumeirah Beach Residences (JBR), Jumeirah Lake Towers (JLT), Dubai Hills Estate, Arabian Ranches, DAMAC Hills, The Springs, and Mohamed Bin Rashid City.
Since the outbreak of the Corona pandemic, Dubai has experienced a veritable run on single-family homes. Families in particular preferred to move into a house and gave up their apartments. This trend is still continuing. Absolutely popular remain the houses on the Palm - in this villa area the prices rose disproportionately to other areas, namely up to 50% compared to the previous year. Since January 2020, prices have even increased by almost 80%. The situation is similar in the segment of apartments - here, too, the purchase prices on the palm have increased markedly.
The picture is similar for rents. The rental prices for villas on the Palm Jumeirah have increased the most. These have increased by almost 45% in the last 12 months and by over 90% since January 2020. Apartments have also seen a 40% increase in rental prices.
Why have prices risen so much?
One reason for the sharp rise in prices is the strong demand for a second home. Dubai has also benefited from the uncertain global economic situation over the past two years. Thanks to the prudent management of the Corona pandemic, it became clear that Dubai is and remains an attractive second home with the best infrastructure and also a professional healthcare system.
Second home buyers come from all parts of the world and for a variety of reasons. We observe more and more investors from the European region (Germany, Italy, France, England), the USA and Russia/Ukraine.
Due to the high demand, the supply side can only keep up to a limited extent. In particular, the supply in premium locations is increasing only slowly. The lack of oceanfront apartments is the biggest challenge for real estate developers. The revitalization of the "Deira Islands", now "Dubai Islands", for example, is intended to counteract the high demand. The project is also in line with the Dubai Master Plan 2040, one of the main goals of which is to increase the number of public beaches by 400%.
However, despite price increases, Dubai remains one of the most affordable luxury housing markets in the world, with an average price per square meter of CHF 8,600. Accordingly, demand for luxury apartments in Dubai currently dominates the real estate market.
Outlook for 2023
What's next? How will prices develop over the next year?
What is true for 2022 will probably also be true in the first quarter of 2023. The market is playing out and prices will remain high, as we don't see any near-term change on either the supply or demand side.
Our slightly more personal market assessment looks something like this: We will probably see trend saturation over the next few quarters. Prices will no longer jump up as much because buyers will increasingly lose the willingness and also the ability to pay higher prices.
Why? Dubai will not be able to fully escape global economic developments either. Rising hypo interest rates (AED with fixed exchange rate to USD) in the local market as well as a looming recession in the USA/Europe, will also arrive in Middle East and "cool down" the real estate market somewhat.
What does this mean for us and our customers?
We expect demand for properties in the most popular areas to remain high because construction activity is limited here and therefore the supply side will not ease. In terms of prices, we continue to see rising prices in the top locations, but no longer by leaps and bounds. This once again underlines the globally valid real estate formula - location, location, location! This confirms our strategy of focusing mainly on value properties in prime locations.
We are very much looking forward to the coming year. Of course we will keep you up to date as always - be it with attractive real estate offers or with the latest trends as well as news from Dubai.
Your Terra Nova Real Estate Team 😊