Dubai’s real estate market continued its upward trajectory in Q3 2024, driven by record population growth, favourable interest rates, and an influx of both residential and commercial transactions.
According to a quarterly report by ValuStrat, the market saw a surge in demand for affordable housing, alongside significant growth in office space, hospitality, and logistics sectors.
With residential capital values soaring, robust office demand, and an expanding industrial sector, the market is setting new benchmarks in both value and volume.
Below is a detailed analysis of the findings from Q3 2024.
Residential Market
Steady capital value growth
Residential property values saw impressive growth, with the ValuStrat Price Index (VPI) rising by 28.9% annually. Villa communities outperformed the broader market, with 98% of freehold villas doubling in value since 2020.
In contrast, apartments registered a more modest growth, although high-demand areas like Palm Jumeirah reached historical price peaks.
- Villa market: Villa prices rose by 33.1% year-over-year, with Palm Jumeirah leading at 42.8%.
- Apartment market: Apartment values climbed by 24.8%, with Discovery Gardens and The Greens showing strong annual gains of over 30%.
Rental market resilience
Dubai’s residential rental market also recorded significant increases.
Apartment rentals rose by 15.4% annually, outperforming villa rentals, which increased by 4.9%.
Demand for smaller, affordable homes remained strong, with nearly 41% of ready homes sold priced below AED 1 million.
Office Market
High demand for office space
The Dubai office market continued to experience robust demand, resulting in annual capital value growth of 25.8%.
Four of the city’s five key business districts, including DIFC and Business Bay, saw notable increases in capital values, driven by limited supply and high demand.
- Capital values: The VPI for office space hit a record 217.9 points, with annual growth at 25.8%. DIFC registered a 43.9% rise, leading the market.
- Office rents: Rents for Grade A and Grade B offices increased by 26.2% and 21%, respectively. Asking rents for prime spaces in DIFC and Business Bay remained the highest, ranging from AED 2,099 to AED 2,583 per square metre.
Supply constraints
While demand soared, the office supply remained tight, with no major completions in Q3.
However, several large projects are underway, such as Aldar’s Grade A office tower, adding much-needed space to the market by 2027.
Retail and hospitality markets
Retail growth driven by new developments
The retail sector benefited from several new developments, including Sobha Realty’s Hartland Mall and Union Co-op’s new community mall.
Existing malls like Dubai Festival City and Dubai Mall reported high occupancy rates of 95% and 99%, respectively.
Despite a challenging macroeconomic environment, the retail market remains resilient.
Hospitality Sector Rebounds
Dubai’s hospitality sector maintained strong momentum with the total number of hotel rooms surpassing 125,000.
As of August 2024, international visitor numbers rose by 7.4% year-on-year, leading to high occupancy rates (76.2%) and increased revenue per available room (RevPAR) at AED384.
Key developments in the hospitality space included the launch of luxury hotels such as The Biltmore Hotel Villas and the planned opening of Kempinski Floating Palace.
The sector’s growth is expected to continue, with Dubai’s airport projecting record-breaking passenger traffic of 93 million by year-end.
Industrial and logistics market
Logistics sector records strong gains
The industrial and logistics market showed strong performance, with the VPI for logistics warehouses rising by 14.6% annually.
Growth was fueled by business expansions and the entry of new companies, which led to higher demand for warehouse space. The average valuation for logistics warehouses reached AED3,009 per square metre.
Top-performing industrial zones included Al Quoz, which saw a 22.5% increase in capital values, followed by Dubai Investment Park and JAFZA South.
The limited supply of high-specification warehouses continues to drive up prices, particularly in prime areas.
Ongoing industrial developments
New strategic partnerships, such as the collaboration between Aldar Properties and DP World, are set to boost the industrial sector further.
Together, they will develop a Grade A logistics park in Jebel Ali, with significant investment into new warehousing facilities, further increasing Dubai’s industrial footprint.
Key macroeconomic factors
Population and economic growth
Dubai’s population hit 3.78 million in Q3 2024, growing by 3.5% year-on-year. The influx of new residents bolstered demand across real estate sectors.
Furthermore, the UAE’s non-oil foreign trade reached AED1.4 trillion in the first half of 2024, marking a record high.
The Central Bank of the UAE expects the GDP to grow by 4% this year, driven largely by the non-hydrocarbon sector.
Interest rate declines boost transactions
The US Federal Reserve’s decision to cut interest rates by 50 basis points in September provided a significant boost to the mortgage market.
A total of 10,118 mortgage transactions were recorded in Q3, with a total value of AED19 billion, as lower borrowing costs spurred real estate investments.
Outlook for Q4 2024
Looking ahead, Dubai’s real estate market is expected to maintain its positive momentum.
While villa communities have already reached peak values, the apartment market still holds potential for growth, particularly in affordable and mid-market segments.
Continued population growth and favourable macroeconomic conditions will support strong demand across residential, office, and industrial markets.
Supply constraints in both office and industrial sectors may drive prices even higher in the short term.
As Dubai gears up for major global events and expands its logistical capabilities, the city is poised to see further increases in real estate investments.
For a detailed perspective on the property market, visit: Dubai - Real Estate Review Q3 2024
