Dubai real estate market faces competition from Abu Dhabi, Ras Al Khaimah: Experts.
Tighter Dubai Land Department (DLD) regulations drive a surge in off-plan property investments, as developer escrow accounts assure buyers' funds are used solely for project-specific expenses.
Residential property prices in Dubai’s off-plan segment are projected to see a price surge of up to 15 percent in the second half of 2024 amidst rising construction costs and continued demand spike from overseas investors, industry players said.
Property prices in Abu Dhabi and Ras Al Khaimah (RAK) – the two other rising UAE real estate hot spots – are also set to see significant price increases in the coming months, with high-end properties in RAK predicted to see as much as 50 percent jump in the run-up to the opening of the casino.
Besides the spike in construction costs – which have been estimated to have seen a 2-3 per cent rise in the recent months in the UAE market, said to be mainly due to ongoing global supply chain issues, continued economic instability overseas and geopolitical events are seen driving international investors into the city’s property market, leading to sustained demand hike, industry insiders said.
“The off-plan property market looks set to witness an increase of 10-15 percent in terms of prices due to soaring demand,” Yogesh Bulchandani, Founder and CEO of Sunrise Capital, a Dubai-based leading developer, told Arabian Business.
Ramjee Iyer, Chairman and Managing Director of Acube Developments, another leading Dubai real estate company, said market trends suggest that Dubai’s off-plan property market will see a 15 percent price hike in the remaining part of the year amid the city’s real estate sector boom.
Significantly, the bullish outlook on the price front in H2, 2024 comes despite the report by ValuStrat revealing a dip in transactional volumes in Dubai’s residential real estate sector in June – for the first time since the pandemic, though off-plan sales posted a whopping 33 percent jump.
The jump in the off-plan segment is attributed in part to stricter regulations by the Dubai Land Department (DLD), under which developers are required to place investors’ funds in escrow accounts, which can only be accessed for project-specific expenses.
The move, aimed at minimising the risk of project delays and ensuring financial transparency, is said to have boosted off-plan appeal.
Abu Dhabi, RAK to give hot competition to Dubai.
Industry players said the residential real estate sectors in the UAE capital city Abu Dhabi and RAK – two emerging hot spots for international investors – are set to give hot competition to Dubai, with the two markets set to see a surge in demand and prices in the coming months.
Bulchandani said along with the surge in demand, especially from cash-rich international investors, a rise in construction costs will also be a factor for the spike in property prices.
“It [rise in construction costs] is obviously challenging for developers,” he said.
According to ValuStrat, affordable apartments and villas in the UAE capital have seen significant price increases, with apartments rising by up to 10 per cent and villas by over 6 per cent in June.
The luxury housing sector has also seen a price rise of 6 per cent for apartments and over 10 per cent for villas, particularly in waterfront developments like Al Reem Island, Al Raha Beach, and Yas Island.
The surge in property prices in RAK underscores its growing appeal as a real estate investment destination.
Overall, the ValuStrat Price Index recorded a 4.2 per cent annual increase and a one per cent quarterly rise, with apartments growing by 2.7 per cent and villas by 5.7 per cent annually.
Iyer said while Abu Dhabi’s market will continue to have stable growth, Ras Al Khaimah’s property market is set to see a surge in prices in the remaining part of the year, with frequent property launches pushing prices higher in each new phase.
“This trend is especially evident in Al Marjan Island,” the Acube Developments’ top executive said.
The residential market in RAK witnessed a significant increase in prices in recent months, rising by 20-25 per cent over the past eight months.
“The surge in property prices in RAK underscores its growing appeal as a real estate investment destination.
“With continuous developments and rising demand, prices look set to increase by as much as 50 per cent by the time the casino opens,” Iyer said.
Changing trends in Dubai’s real estate market
Industry insiders said Dubai’s residential real estate segment is also seeing significant trend changes of late, with buyers, especially international investors, increasingly preferring integrated communities and projects with smart home technologies.
“We are seeing a growing desire [on the part of buyers] for properties in more fully integrated ‘complete’ communities.
“People increasingly want to live in areas that have access to great amenities and plenty of things to do,” Iyer said.
Bulchandani said modern-day buyers are more environmentally aware and concerned about sustainability and are looking for properties that will be equipped with smart home technologies, the latest energy-saving technology and eco-friendly features.
Industry insiders said there has been a recent uptick in demand for townhouses and villas, although there’s still a lack of supply.
“This is likely due to more people putting down roots in Dubai for the long term,” Iyer said.
In terms of locations, Dubai South continues to do well, as does Jumeirah Village Circle (JVC), Furjan and areas along the newly announced metro blue line.
People want space, so they are willing to live further out from the main city areas in order to get larger properties with bigger plots, etc. That is why areas like Dubai South and the Expo area are doing well, senior executives at a leading developer said.
Iyer said the Dubai market has also been seeing some interesting demographic trend changes recently.
“For example, British investors have overtaken Indians this year as they flock to the UAE for Golden Visas and tax-free benefits, besides high rental yields and the emirate’s unparallel standard of living,” he said.
For a detailed perspective on the property market, visit: Dubai - VPI Residential Capital Values - June 2024
