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Dubai property prices start to cool down amid inflation worries, high interest rates

After more than a year of exceptional gains, property prices in Dubai are starting to cool down as more housing units come on stream, mortgage interest rates move higher and surging inflation worries investors, according to ValuStrat.

The real estate consultancy's latest citywide ValuStrat Price Index (VPI) inched up only by 1.1 percent in June compared to the previous month. The monthly growth of capital values for certain properties has also moderated, while prices in some locations have seen no price changes.

"The rate of price growth for villas and townhouses in Dubai continued to slow in June," ValuStrat said, confirming that sales rates have been cooling down for months.

Dubai's villa properties posted a moderate monthly growth rate of 1.7 percent in capital values last June. This is in contrast to last year when values increased by an average of 2.3 percent each month.

According to Declan King, Managing Director and Group Head - Real Estate at ValuStrat, the price decline, particularly within the villa segment of the market, has been going on for months.

He said price ceilings in some locations, as well as the "affordability limits" of buyers, have probably been reached.

"The rising cost of living, increasing mortgage rates and improved supply from the off-plan villa market are other contributors," King told Zawya.

Dubai's property market had been seeing exceptional year-on-year gains since late 2020, supported by high demand from domestic and overseas investors.

ValuStrat's data showed that several locations in Dubai, such as Mudon and Dubai Hills Estate, saw marginal price increases in June, with monthly increments of 0.9 percent and 1.1 percent, respectively. 

However, on an annual basis, average villa prices are still 32.2 percent higher. Premium neighbourhoods such as Arabian Ranches, Jumeirah Islands, The Lakes and The Meadows, have seen prices rise year-on-year by 38.8 percent, 36.6 percent, 34 percent and 33 percent, respectively.

Within the apartment segment, the lowest annual price growth was seen in Dubai Production City (0.5 percent), Discovery Gardens (0.8 percent) and Motor City (1.5 percent).

Other locations, such as Dubai Sports City, did not record any price changes in June compared to a year ago.