The number of new residential real estate project launches in Dubai is soaring and has exceeded pre-pandemic levels in the third quarter of 2022.
Developers are relaunching previously on-hold projects to capitalise on favourable market conditions, according to real estate consultancy CORE.
It said about 5,700 units were delivered in Dubai in Q3, taking the year-to-date figure to 19,000 units. A further 13,500 units are expected to be created in Q4.
Most deliveries continue to be in the apartment segment with only 22 percent of 2022 projects being villas. This is creating a supply deficit in the villa market and continuing the upward pressure in villa rents and sales prices.
Prathyusha Gurrapu, head of research and advisory at CORE, said: “We continue to see a significant rise in new project announcements, with Q3 launch volumes up by 61 percent year-on-year and exceeding pre-pandemic levels by 11 percent.
“Several noted projects are witnessing strong absorption, demonstrating Dubai’s renewed investor confidence, while leading some developers to relaunch previously on-hold projects.”
These include the mothballed Palm Jebel Ali island and Dubai Pearl, a long-delayed development at the entrance to Palm Jumeirah. A master plan has also been drawn up for the former Deira Islands, now called Dubai Islands.
Dubai has also recorded the highest number of sale transactions above AED100 million – 16 – in the secondary and off-plan market, compared to five in 2021.
“Due to Dubai’s positioning as a global lifestyle destination and competitive tax environment, along with internationally comparable ultra-prime residences catering to UHNI buyers, we expect demand from this segment to continue,” Gurrapu noted.
However she added that the sharp rise in off-plan transactions creates an inherent risk. “While there are stronger regulations in place now, should demand be impacted in the coming quarters due to rising interest rates, inflation, a strong dollar to which the AED is pegged and rising sales prices, this may become a cause of concern.”
Citywide villa sales prices are up by 16 percent year-on-year and apartment prices are up by eight percent, although the pace of price increases is slowing, CORE added.
This was echoed by consultants ValuStrat. Its citywide valuation-based price index saw a modest 0.9 percent monthly increase, driven by the villa submarket, which represents 15 percent of homes in Dubai, witnessing a 1.3 percent rise. ValuStrat added that apartments approached possible price ceilings, with a modest 0.6 percent monthly increment last month.
Gurrapu said that while overall market sentiment remains positive, issues around affordability are emerging.
“Although the prime market is relatively resilient to market risks, the overall rise in acquisition costs is particularly impacting the affordable and mid-market segments, with some end-users increasingly being priced out,” she said.
In the short to medium term, Knight Frank said it did not foresee a stalling in demand, with the mainstream market expected to register a price growth of five to seven percent by the end of the year. Prime property prices are likely to end the year around 60 to 80 percent higher than 2021.
“With increasing global economic uncertainty, Dubai is once again emerging as a safe port in the storm,” said Faisal Durrani, partner and head of Middle East research at Knight Frank.
“The unrelenting demand from international ultra-high-net-worth individuals when combined with the shortage of waterfront homes, the government’s world-leading response to the pandemic, positive business sentiment, one of the most business friendly environments anywhere, and arguably some of the globe’s best beach front real estate is what underpins our outlook.”
Ata Shobeiry, CEO of real estate portal Zoom Property, said he believes that the Dubai real estate market will be positively impacted by the lifting of pandemic restrictions in the UAE, with face masks no longer mandatory in public areas, except for public transportation, mosques and medical facilities.
“Now that the restrictions are lifted, the real estate sector will garner more interest from high-net-worth individuals looking for investment opportunities in the UAE,” he said.
The rental market is also witnessing steeper rises compared to sales prices across districts leading to higher rental yields. Citywide villa rents are up by 28 percent and apartments by 26 percent year-on-year.
CORE’s Garrapu explained: “As most districts have witnessed over 25 percent increases, such a sharp rise in rents is impacting affordability and is a growing concern among tenants.
“Landlords who have been in a downward market for a long time are pushing to increase rents during renewals, while many tenants are resorting to the RERA rental calculator to protect them from such increases.”
Shobeiry added: “The increase in villa rents is forcing many tenants to look for affordable options.
“The fact that pandemic restrictions are being lifted is also playing its role, as there’s no longer a fear of another lockdown which will confine people to the four walls of their homes.
“However, those who are used to the upscale lifestyle of villas will continue preferring them, which will fuel the growth of this segment.”
Dubai’s relaunched mega-projects
Palm Jebel Ali
Nakheel is planning to relaunch the Palm Jebel Ali master project, one of a series of manmade, palm-shaped island projects off the coast of Dubai. Launched in 2002, it stalled during the global financial crisis and development at the site has been on hold since around 2009.
The Dubai state developer has also unveiled the new look masterplan for its 17 sq km Dubai Islands development, previously known as Palm Deira and, later, Deira Islands. Dubai Islands will be spread over five islands and will house over 80 resorts and hotels, 20km of beaches, plus parks, open spaces and golf courses.
This huge project started in 2004 before stalling five years later but it has reportedly been bought by Dubai Holding at auction, according to the Financial Times. The original plan included four mixed-use towers connected together at the base and by a sky bridge at the top.