Dubai’s real estate market on a hot streak

/ EdgeProp Singapore |

July 19, 2024 10:00 AM SGT

The world’s tallest tower Burj Khalifa in Downtown Dubai (Photo: Savills)

After three straight years of heady growth, Dubai’s home prices continued their ascent in 1H2024. In the upper echelons of homes priced above US$10 million ($13.42 million), Dubai registered a record 431 sales in 2023 and a further 190 sales in 1H2024, says Knight Frank in its July 8 report.

Further up the spectrum, the number of homes above US$25 million grew by 25%, taking the tally for 1H2024 to 21, says Will McKintosh, regional partner and head of residential, Middle East and North Africa.

Transaction activity in Dubai continues to accelerate, particularly at the top end of the market. Knight Frank reports that the total value of luxury homes sold in 1Q2024 was US$1.73 billion, up 2.2% y-o-y.

Consequently, the number of homes available for sale in Dubai’s prime residential markets, notably Emirates Hills, Jumeirah Bay Island, Jumeirah Islands and The Palm Jumeirah, contracted by 47% over the last 12 months to 2,851 properties, according to Knight Frank.

Indeed, there isn’t much available stock, says Andrew Cummings, Savills’ head of residential sales, Middle East, and a Dubai resident for eight years. “The most coveted residences in Dubai are those on the waterfront,” he adds. “The Palm Jumeirah has developments that [complete] in the next two to three years. There is no available sand to build on, but there’s still an overwhelming demand for beachfront homes.”

Dubai registered a record 431 homes priced above US$10 million ($13.42 million) in 2023 and a further 190 sales in 1H2024, says Knight Frank

Influx of millionaires

The lack of new housing stock is attributed to the influx of millionaires and demand for luxury homes in Dubai. Over 4,500 millionaires are said to have moved to Dubai last year. Up to 6,700 millionaires are expected to make the Emirates their home by the end of 2024, with a significant number from the UK and Europe, according to the Henley Private Wealth Migration Report 2024, published on June 18.

It is the third straight year that Dubai and the United Arab Emirates (UAE) reign at the top of the league table as the world’s leading wealth magnet, says Henley & Partners. The US and Singapore are in second and third place, respectively, with 3,800 and 3,500 inbound millionaires by year-end.

The number of millionaires (with at least US$1 million in liquid assets) in Dubai has increased 78% to 72,500 over the past decade from 2013 to 2023, says Henley & Partners in its World’s Wealthiest Cities Report 2024, published in collaboration with New World Wealth in May. Dubai is also home to 212 centa-millionaires (with over US$100 million) and at least 15 billionaires.

Up to 6,700 millionaires are expected to make the Emirates their home by the end of 2024 (Source: Henley Private Wealth Migration Report 2024)

Quality of life

Part of Dubai’s appeal is its emphasis on the quality of life, says Savills’ Cummings, a former economics consultant and a resident of Dubai for the past eight years. “Dubai’s heavy investment in infrastructure, including schools and hospitals are designed to attract people to come,” he says.

Cummings notes that the old mantra of ‘Build and they will come’ has changed in recent years to ‘Build and they will come and they will stay’. “It’s a very different concept from what people would normally think of an expatriate lifestyle,” he adds. “That sense of permanence in Dubai also encourages people to invest in real estate.”

He points to Dubai’s visa regime as another reason for its flourishing real estate market. The golden visa, introduced in 2019, grants a 10-year residency for those who invest a minimum of AED2 million ($731,485) in real estate. A “retire in Dubai” visa was launched in 2020 for residents above 55 and is renewable every five years. The digital nomad visa, targeted at those who want to work remotely but live in Dubai, was introduced in 2021. The blue visa rolled out in May offers a 10-year residency to those who have contributed to protecting the environment in and outside the UAE.

Cummings: No city has grown the way Dubai has (Photo: Albert Chua/EdgeProp Singapore)

Top foreign buyers

Chinese buyers were among the top foreign nationals fuelling demand for homes in Dubai last year. Based on Savills’ data, Chinese nationals accounted for 13% of all property transactions in 1H2023, up from 8% over the same period in 2022. “This surge is a significant factor in Dubai’s real estate market dynamics,” says Cummings. “Our Chinese demographics include working individuals, entrepreneurs, business owners and high-ranking executives as well as families with children.”

Emaar Properties, Dubai’s largest developer, reported a significant increase in Chinese investment, which accounted for 7% of total sales in 1H2023, up from 4% the previous year. Incidentally, Emaar Properties is the developer of Burj Khalifa, the world’s tallest building at 160 storeys and 2,716.5 ft.

In 2023, India was the biggest group of property buyers in Dubai, followed by those from the UK and Russia, respectively. Among the top 10 foreign buyers are those from Egypt, Lebanon, Pakistan and Turkey, which significantly increased. “It is an indication of Dubai’s continued role as a global haven for geopolitical and economic stability,” says Cummings.

“Even though there is a lot more interest from Asian buyers in Dubai, Singaporeans are not among the top 10,” he adds.

Ruben Koh, co-head of international residential sales at Savills Singapore, agrees. However, he points to two potential pools of investors: Those who view Singapore as expensive today, especially with the property cooling measures in place, and Indian expatriates working in Singapore, drawn to Dubai’s proximity to India and its tax haven status.

According to Koh, there are two potential pools of investors: Those who view Singapore as expensive today and Indian expatriates working in Singapore, drawn to Dubai’s proximity to India and its tax haven status (Photo: Albert Chua/EdgeProp Singapore)

Resilience

Dubai’s residential real estate market continued to show resilience in 1Q2024. Savills says transaction volume vaulted 35% q-o-q, reaching an all-time high of 35,100 units. About 63% of the transactions were for projects currently under construction.

In 1Q2024, about 5,000 residential units were launched in Dubai, of which 84% were apartments in projects such as Eleve by Deyaar Group, The Sapphire by Damac and Mercedes-Benz Places by Binghatti Group.

“Dubai’s real estate sector remained dynamic, attracting investors and end-users,” says Savills. “Factors such as population growth, economic resilience, business confidence, and a thriving tourism and hospitality sector contribute to its ongoing appeal.”

Despite the double-digit growth rates of the last three years, Dubai’s luxury residential market remains one of the most affordable in the world, says Knight Frank. US$1 million secures some 980 sq ft of prime residential space in Dubai, compared to just 366 sq ft in New York, 355 sq ft in London, or 344 sq ft in Singapore. Furthermore, average transacted prime residential prices at end-1Q2024 stood at AED3,754 psf or US$1,023 psf.

US$1 million secures some 980 sq ft of prime residential space in Dubai, compared to just 366 sq ft in New York, 355 sq ft in London, or 344 sq ft in Singapore (Source: Knight Frank)

Rental rates in Dubai saw an average increase of 7% across the city in 1Q2024, says Savills. The average rental rates of apartments were up 8% q-o-q, while the average rents of villas grew 6% q-o-q.

Dubai Land Department data showed 159,941 rental registrations in 1Q2024, a 5.88% increase from the previous year. The growth was underpinned by a 12.3% growth in renewed rental registrations, while new rental contracts registered a 4.1% decline.

According to CBRE’s 1Q2024 report on Abu Dhabi and Dubai, published in May, most tenants prefer to renew their existing residential leases as they are not prepared to pay the higher rental rates on new leases. “There is a distinct lack of available stock, particularly in prime and core residential areas.”

Source: Savills Research

Lack of available stock

Dubai’s population increased by 100,240 last year, reaching 3.65 million at the end of December. The expatriate population comprised about 88.5% of Dubai’s population in 2023.

Dubai Statistics Centre data showed that the emirate’s population rose by 25,776 in 1Q2024 after the 100,240 influx last year. Still, CBRE estimates that only 39,190 residential units were completed and delivered by the end of 2023, and another 6,526 units were delivered in 1Q2024.

CBRE’s projection is that a further 46,086 new units will be delivered by the end of the year. “Given the historical materialisation rates, we expect that a limited portion of this upcoming stock will come online as planned,” says CBRE.

View of Downtown Dubai from the balcony of the penthouse at Vida, which is on the market for AED 37 million (Photo: Savills)

Near peak prices

Savills’ Cummings reckons average residential prices are near the previous peak in 2014. “Dubai is still a relatively new market, and this is its third property cycle,” he says.

After three years of strong capital growth, Savills is projecting “steadier and more sustainable growth” of 4% to 5.5% in 2024 and a return to “a more normal market”.

Another milestone this year for Dubai was the removal of the UAE from the grey list of the Financial Action Task Force (FATF) in February, after its inclusion two years ago. “Dubai and the UAE were removed from the FATF grey list because a significant amount of anti-money laundering legislation has been implemented,” says Cummings.

However, the global coalition against corruption, Transparency International, said in a May report that the ‘Dubai Unlocked investigation’ reinforces the need for ongoing scrutiny of the UAE’s efforts to prevent and detect dirty money being invested in the country.

The Dubai Unlocked investigation is based on data from the Centre for Advanced Defense Studies, which was shared with E24 and the Organized Crime and Corruption Reporting Project, which, in turn, coordinated with over 70 media outlets worldwide. The investigation indicated “a very high likelihood that more than 200 people who could be targeted for investigation, including some under US sanctions, bought real estate in Dubai”.

The living room of the penthouse at Vida in Downtown Dubai (Photo: Savills)

Unchartered growth

Savills’ Cummings says people need to consider Dubai’s growth in terms of its history. “No city has grown the way Dubai has,” he says.

He points to the projected population growth of six million by 2040 and the massive infrastructure projects announced. A new US$35 billion passenger terminal is being built at the Al Maktoum International Airport. It is expected to handle 260 passengers a year, making it the largest airport in the world. Another US$11 billion has been deployed to the building of the Etihad Rail, which will run from the Saudi border across the UAE, connecting the different cities.

Plans are underway to construct Palm Jebel Ali, which is twice the size of Palm Jumeirah. The man-made island of 13.4 sq km will eventually have luxury beachfront homes, 80 hotels and resorts on the man-made island, restaurants, bars and beach clubs. “It will effectively be a new residential community,” says Cummings. “With the development of the infrastructure — the airport and the Etihad Rail — the UAE will become more connected.”

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