Over the past 20 years, the Dubai housing market has already experienced a boom twice, which, however, was followed by a very painful decline. From 2002 to 2008, the city became one of the fastest growing in the world, and real estate prices quadrupled. After the adoption of the law allowing foreigners to own real estate in March 2006, foreign investments were not long in coming, which further spurred the ambitions of this rich emirate. Billions of dollars have been invested in megaprojects such as Jumeirah Garden City, Dubiland, The Lagoons, Palm Jumeirah and The World. More than 20% of buyers of all categories of real estate were Europeans, including Russians.
Then, at the end of 2008, the global economic crisis broke out. Transaction volumes have plummeted. Almost half of the construction projects in the UAE worth about 1.1 trillion dirhams (300 billion US dollars) have been either suspended or canceled. As the economy recovered, work resumed on frozen facilities. From January 2012 to the end of 2014, Dubai saw a rapid increase in housing prices, by an average of 21.5% per year. However, by the end of 2014, the recovery slowed down, after which the housing market plunged into depression. According to Reidin.com , in 2015, the Dubai Residential Real Estate Price Index (RPPI) fell by 11%, in 2017 by 3.9%, in 2018 by 8.6%, in 2019 by 6%, in 2020 by 7.1%.The housing market began to recover in 2021. This was largely due to the fact that the UAE government did not impose harsh measures during the COVID-19 pandemic and left the borders open, limiting itself only to the requirement of mandatory testing and wearing masks. Prices for apartments and villas in Dubai increased by an average of 9.25% in 2021. In 2022, the price growth continued (+9.53%). According to the Dubai Media Office, in 2022, the number of registered real estate transactions in the emirate increased by 44.7% compared to the previous year, and the total value of transactions reached a record level of 528 billion dirhams UAE (143.8 billion US dollars), which is 76.5% more than a year earlier.
Last year, the demand for Dubai real estate, especially elite, blazed thanks to foreigners who want to move themselves or move capital (Russians were in the lead among buyers, followed by citizens of Great Britain, India, Germany and France). The adoption of a law facilitating the receipt of resident visa. In particular, the threshold of investments in real estate for applicants for a 10-year "golden visa" was reduced to 2 million dirhams of the UAE (545,000 USD), with the possibility of buying an object under construction, and for applicants for a 2-year visa up to 750,000 UAE dirhams (US$ 204,000). In addition, programs have been expanded to attract talented specialists in various fields.
The beginning of 2023 turned out to be more than optimistic. The upward trend in sales and real estate prices continues. However, how steady is this rise, and are the prices fair?
How would you describe the current state of the Dubai real estate market? What are your impressions of the first months of 2023?
Valery Tumin, Director of CIS Markets fäm Properties: The Dubai real estate market has been actively growing since 2021, and each quarter shows higher indicators than the previous one. According to DXB Interact, the first quarter of 2023 was a record in the history of the Dubai real estate market (since 2014), both in terms of the number of transactions and in terms of sales. The total value of sales reached 88.7 billion dirhams of the UAE.
Many believe that the summer season can lead to a drawdown of the market due to rising temperatures. However, the experience of last year shows that such fears are not justified. Comparing Dubai three years ago with its current state, it becomes clear that these are two completely different cities from an economic point of view, especially in the context of the real estate market.
What factors can affect the market?
Elena Timchenko, Managing Partner Royal Home Real Estate: The Government of Dubai strictly ensures that the interests of investors are protected as reliably as possible, constantly introducing new amendments and changes to legislation aimed at excluding various kinds of manipulations that lead to the disappointment of investors. Transparency, simplicity and speed of completion of real estate transactions are the indisputable advantages of Dubai over many other markets. Investors are constantly receiving new opportunities and privileges, being under the protection of the state.
Valery Tumin: The openness of data directly affects the real estate market and its development. And as part of the transactions, it is the data from the DXB Interact portal, created by us together with the Dubai Land Department. All data is displayed in real time and in full. This allows investors, including non-professional ones who have never even been to Dubai, to receive the necessary information for a thorough analysis.
The rights of sellers and buyers are protected by law. If the transaction is carried out on the secondary market, then an electronic contract is concluded, which comes to the email directly from the Land Department. By signing it, the seller and the buyer understand that their rights are fully protected. The seller cannot sell this apartment to anyone else, because the Land Department will not miss this transaction, since there is already a signed electronic contract. The seller will not be able to change the price because it has already been agreed earlier. And the buyer will not be able to refuse this transaction. And if he still refuses, he will lose a 10 percent deposit, which is completely transferred to the seller. Sanctions against the seller who refused the transaction are even more unprofitable for him. Not only does he pay the buyer a 10% deposit in the form of a fine, but also the sale of his property in Dubai can be blocked by the Land Department for a period of 1 year.
Do you think the Dubai market has potential for growth? If so, what are the prerequisites for this?
Valery Tumin: The real estate market in Dubai is not growing by itself. The growth is due to the mechanisms created to attract international business. A large number of large companies, non-professional and professional investors are relocated here. Both are looking for new opportunities to diversify their assets, protect funds from inflation, recession and economic stagnation.
In addition, Dubai offers attractive conditions for buying real estate. There are many different objects, from budget to luxury, with high potential for investment due to the interest-free installments provided. Foreign buyers are provided with opportunities not only for owning real estate, but also many favorable conditions and benefits.
What are the main risks for the Dubai real estate market in 2023?
Valery Tumin: The real estate market is subject to such a phenomenon as cyclical growth is necessarily followed by decline, and vice versa. Dubai is currently experiencing the third cycle of rapid growth in the XXI century after two previous ups, followed byadjustments in 2009 and 2015.
The growth of real estate prices in Dubai last year was 16-19%, but they are still below the peak level of 2014. This gives reason to believe that the real estate market in Dubai will continue to grow this year. According to Knight Frank, experts expect the Dubai real estate market to grow by 13.5% in 2023.
Dubai is recognized as one of the safest cities in the world by real estate value according to the report Global Real Estate Bubble Index from UBS Bank.However, there are always risks. To level them, you need to know the real estate market well. Despite the fact that the data on the site DXBInteract.com We are open to everyone, we recommend that you still contact a reliable broker. Only a deep data analysis will help you make a financially profitable decision.
Elena Timchenko: Investments are always associated with risks, no matter what assets we are talking about. I would recommend considering a few points to avoid mistakes. Firstly, you should not invest in overheated projects, wanting to make a quick profit. You should not listen to hundreds of bloggers, among whom there are many demagogues now, but you need to do at least a basic analysis of the project. Secondly, the standard but important advice is to study the history and check the reputation of the developer with whom you plan to conclude a contract. And, thirdly, it is important to differentiate assets. The distribution of assets in the portfolio will always help to reduce the risks of losses and balance the profitability.
Which market segments are the most attractive for investment? The elite segment, as in 2022? Or not only?
Elena Timchenko: The elite segment is now in the spotlight of investors. The demand is so great that the supply does not keep up with it. It turned out that there are not enough objects on sale with the characteristics that a discerning client needs, namely, such buyers, with very high standards, have come to the market today.
Business class real estate is still in demand, it is in demand for rent from so-called white-collar – highly paid professionals.
And, of course, housing that can be rented to average employees is always attractive. However, I would like to note that this property is more suitable for long-term investments, for those buyers who want to receive a stable income for a long time from renting.Valery Tumin: The main trend of 2023 is the ultralaxery market. At the moment, there are not so many offers, especially ready-made ones that can satisfy the demand of demanding customers. This is due to both the growth in the number of foreign investors and the migration of rich people. Today, wealthy buyers have almost nothing to buy. The reason why the demand for such objects remains is simple - the cost of luxury housing in Dubai has increased by 89% over the year. We do not predict a decline in demand for the elite segment in the near future.
Next comes the inexpensive segment - up to $ 350,000. There is a very high demand in this segment, as soon as a similar offer appears on the market, the object is immediately bought - this can often be seen in real time on DXB Interact. There are clearly fewer offers on the market than there are requests. However, just having time to buy an inexpensive unit is not enough. It is important to pay attention to the details so as not to be disappointed: choose a floor, a view that no one will block with a neighboring building, and take into account other points. There are even fewer such offers. But it's worth hunting for them: there is an attractive price in this segment, and most importantly, such apartments pay off quickly.
Which areas and locations of Dubai are the most promising today? Perhaps there are "rising stars"? Which of them would you recommend to buyers with different budgets for their own living and for investment purposes?
Valery Tumin: The JVC district has been actively growing for more than the first quarter. This is a quiet family location with a high degree of privacy.
If we talk about ultralaksheri, then this is Palm Jumeirah, a unique, man-made island in the form of a palm tree. The place attracts wealthy tenants and buyers who can afford luxury real estate on the coast.
It is also worth noting Dubai Marina with Dubai Harbour area and private beach. This place is popular with tourists and property buyers due to its convenient location and a rich set of entertainment. It is surrounded by high skyscrapers, marinas, shops, cafes and restaurants. The Dubai Harbour area is under active construction, which means that price growth is guaranteed in the next few years.
Elena Timchenko: The pearl called Creek Harbour was opened a long time ago, but for a long time it remained undervalued by investors, as, in general, often happens with new megaprojects. I believe that this project still has a huge potential for growth.
The other two locations that I would like to draw attention to are Maritime City and Healthcare City 2 (with the Ritz-Carlton and Kempinski residences under construction in it).
Any new project or megaproject is especially attractive in terms of price growth at the initial stage, when the investor asks his realtor several times where it is and what it is. When the project is on everyone's lips, unfortunately, it's too late for big gains. As one of our investors interestingly noted, you need to get on the train either while it is standing, or when it has just started. Of course, you can jump in on the move, but this is less profitable and more risky.
What notable projects will start in Dubai in the near future in different segments? Which of them would you recommend paying special attention to?
Elena Timchenko I think it is not quite correct to name exactly the projects. The success of an investment significantly depends on both the volume of the investment and its ultimate goal. In any case, I would advise you to make a portfolio of different projects and not focus on any one segment. I would recommend new investors to start with the projects of large developers for their personal peace of mind. Although now many new small developers have entered the market, which can offer no less high, and often higher, quality and attractive delivery dates. It is worth finding your own realtor who does not sell just for the sake of selling, and, plus, has a wide range of after-sales services, such as rental and property management. Such companies, as a rule, initially approach the formation of their sales catalog more deeply.
Valery Tumin: Choosing an apartment based on the weight of the developer's brand and the start of new projects is an erroneous strategy. We recommend our clients to abstract from big names, especially in isolation from the context. Each buyer has its own tasks, and it is from them that you need to proceed. For example, an apartment for investment and for yourself are two completely different scenarios. There are two completely different scenarios for resale and for obtaining passive income by renting out. Only in the symbiosis of analytics and introductory at the request of a particular buyer will it be possible to choose the perfect object.
New projects are regularly launched in Dubai, popular areas are being completed and new ones are being developed, and everyone has their own consumer.
Dubai's real estate market is constantly changing, but its potential remains attractive. I would like to emphasize that a crucial role in the search for a profitable object or ideal housing is played by qualitative expertise and analysis of proposals.
Summary
Dubai's real estate market is growing for internal and external reasons and is not overvalued. The potential for its growth is far from exhausted, given the continued influx of foreigners and their investments. In particular, after the opening of the borders, the Chinese joined the interested parties from other countries, and they have not exactly revealed all their investment power yet.
The population of the emirate is actively increasing due to migration and, accordingly, the demand for housing and prices for apartments and villas continue to go up. Thus, the number of residents in Dubai in April 2023 exceeded 3.5 million people, and by 2040, according to government plans, the city will become home to 5.8 million people.
Finally, one of the main arguments of those who are optimistic about the Dubai market is that prices for luxury real estate here are still significantly lower than in other megacities (7 times lower than in Hong Kong and 5.5 times lower than in London). At the same time, the quality of facilities and, in general, the standard of living in the UAE is often higher and the comparison, say, with London, is already quite fair.
Sources: Global Property Guide, Gulf Business, Arabian Business
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