Dubai’s residential real estate has been on a tear and shows few signs of slowing down, with experts saying the United Arab Emirates city’s latest real estate boom is built on steady footing that reflects the market’s coming of age.
“We’re getting ever closer to a maturing market and the whole world’s property eyes are on Dubai because it’s doing what no other market is doing, which is going up,” said Phil Sheridan, CEO of Berkshire Hathaway Gulf Properties.
In the past year, real estate values in Dubai have risen nearly 20%, and in the third quarter, they surpassed their 2014 peak to all-time highs, according to Knight Frank’s Q3 Dubai residential market review.
The rising values are influenced by the number of wealthy international buyers who are snapping up the city’s highest-end properties for personal use. Experts including Sheridan said that a defining feature of this real estate cycle is that more and more buyers are purchasing to live in their properties rather than hold them as investments. Because of the city’s high cost of rentals, it often makes more financial sense to buy for those who wish to make a home in the global city.
It’s this, as well as measures implemented by the government, that have kept the market competitive, with little risk of oversupply to dampen the new heights Dubai’s real estate is reaching. With its business-friendly atmosphere, ease of availability of visas and new solid ground that the real estate market is thriving on, there’s never been a better time to consider Dubai as a primary or secondary home destination.
However, the experts cautioned, Dubai’s real estate market isn’t immune to the effects of global forces beyond its control. But for now, that’s not a concern as the city’s population grows.
“It’s Las Vegas on steroids,” Sheridan said.
Driving Demand
In this real estate cycle, which started in March 2020, many international buyers have relocated themselves, their families and their businesses to Dubai, keeping demand for real estate high, said Faisal Durrani, Knight Frank partner and head of research, MENA.
Dubai’s head-on response to the Covid-19 pandemic—which allowed the country to reopen its borders in July 2020 while much of the world remained shut down—played no small part in attracting folks to the city.
Underpinning that is the U.A.E.’s popular golden visa, launched in 2019 to attract wealth and talent to the country. Real estate investors who spend approximately US$550,000 or more on property can obtain a 10-year, renewable residence visa. That’s an easy task for any wealthy foreigner with eyes on a home in Dubai.
A lot of Dubai’s real estate success this cycle has been by design, said Haider Tuaima, director and head of real estate research at international consulting group ValuStrat.
“The government has done two things: One is to drive demand, and the other one is to control the supply,” he said.
To boost demand, the government introduced the golden visa. To control supply, it introduced in 2019 a committee to monitor the projects of semi-government and private developers to ensure they weren’t overlapping on their offerings in order to keep luxury properties competitive.
“Developers used to introduce similar projects and that created an oversupply situation before,” he said. “This committee was set up by the government to ensure that that doesn’t happen again.”
High-Priced Properties Soar
Instability around the world has driven investment and migration into the city, with Dubai being a “major benefactor of other problems around the world,” Sheridan said. The Arab Spring that began more than decade ago across the Middle East, the war in Ukraine and the ongoing flight to tax havens have all driven migration to Dubai.
On top of that, the city has been strategic about attracting wealthy people and notable names, becoming a world destination for upscale branded residences with name recognition. Sheridan said it’s not uncommon for semi-government developers to offer properties in luxury developments to big names at discounted rates to stir up interest in Dubai.
Take Brazilian soccer star Neymar da Silva Santos Jr., who purchased a US$54.45 million penthouse in Dubai’s Bugatti Residences in November. It was originally priced at US$100 million, Sheridan said.
“Bollywood, Hollywood, movie stars, athletes, entrepreneurs, they all want a slice,” Sheridan said. “And the more they come, it’s almost like a must have.”
Knight Frank found that while 64% of wealthy buyers are now interested in purchasing properties as an investment, 43% of buyers worth in excess of US$15 million were interested in buying a home in Dubai for personal use.
This cycle has largely represented more stability in the real estate market because demand for the most expensive homes in the city largely stems from buyers who are purchasing as end-users, “reversing a two-decade old trend of ‘buy-to-flip’ activity, which underpinned price volatility in the past,” according to Knight Frank.
And what a time for the city’s highest-priced properties. The number of properties for sale in the city costing US$10 million or more has been driven down by 65% over the past year because demand has overwhelmed supply, according to Knight Frank. In the same period of time, Dubai saw its priciest home ever sold, the 22,000-square-foot penthouse at Como Residences on Palm Jumeirah that traded for roughly US$137 million in December 2023.
Part of the allure, said Sheridan, is that at a time when wealth is treated with increasing hostility across the world, Dubai provides a place where people can come and feel like they can enjoy their wealth.
“Enjoying your wealth means that you are safe, you’re secure,” Sheridan said. “No one will look at whether you’ve got a Rolls-Royce Wraith or a foil-wrapped Lamborghini.”
What Lies Ahead
The real estate market is still on the up and up, Tuaima said, but that does mean there’s inevitably a downside to come. What will cause the turn is yet unclear.
“There are obviously downside risks to the market, most of which are external factors rather than internal,” Durrani said.
As a global city, Dubai would not be immune to the effects of a global recession.
“It could result in job losses. It could result in a decline in population, which could then therefore impact demand for real estate. So, that is a very real risk, and probably the most significant one for this market,” he said.
Another risk is conflict in the Middle East, an event that has the ability to create volatility in oil prices. Lower oil prices mean less spending by governments around the Gulf, Durrani said, which in turn would affect consumer sentiment, hurt demand for real estate and impact job creation in Dubai.
On the other hand, if oil prices spike, it could drive up global inflation and spur interest rates to rise, making it more expensive for borrowers and developers in the region and beyond.
But right now, the area’s outlook is positive.
“We’re expecting prices to continue trending up,” Durrani said. “There are no indicators that we are looking at that suggest there is an imminent cliff edge on the horizon at all.”
For a detailed perspective on the property market, visit: Dubai - VPI Residential Capital Values -November 2024
