The boom in Dubai's residential real estate market has begun to spread to the city's outskirts, with project prices skyrocketingluxuryIn major regions record levels.
The city, whose most sought-after neighborhoods stretch parallel to the shores of the Arabian Gulf, is witnessing a growing demand for homes in areas stretching east towards the desert. Deals in some areas of secondary locations such as Dubai Silicon One and Dubai Sports City - which remain affordable - have reached record levels, according to ValuStrat, the real estate appraisal and research firm.
“Affordability is the main driver, as everything is getting more expensive,” said Haider Tuaima, director and head of real estate research at the Dubai-based firm. He explained that investors "are currently paying a higher value for a smaller area, compared to what was the case 3 years ago."
influx of newcomers
Dubai's real estate boom comes after a 7-year slump, thanks to an influx of new entrants, from million-dollar cryptocurrency earners to bankers relocating from Asia to super-wealthy.Russiansseeking to protect their assets.
This recovery continued until last July, when apartments, which account for nearly 85% of the city's housing supply, recorded an average increase of 9% in prices compared to the previous year, the largest increase in its history.
House prices increased an average of 2% compared to the previous month. Gains for single-family homes, known locally as villas, outperformed this increase, although the overall rebound in apartment prices contributed to an increase in prices for secondary locations, according to Value Strat.
Reasonably priced sites
The strength of Dubai's market recovery contrasts in a big way with the decline in markets across the world, as high interest rates dampen deals. Toaima of Value Strat explained that cash buyers account for the vast majority of deals in the emirate, helping fuel the market's upswing.
However, the market's recovery has been mixed so far. While, for example, an increase of 1.7% in the prices of apartments in the "Remraam" area resulted in a growth in heights on an annual basis by 2.9%, this seems insignificant compared to an annual increase of 17.9% for apartments in the artificial island of Palm Jumeirah.
Tuaima said that up until the last quarter, some areas continued to slow with little or no growth in prices or rents, partly due to an oversupply, particularly of apartments. However, he pointed out that this situation is beginning to change now, taking into account the momentum of the population's shift to affordable price locations for them.
"While supply will continue to increase, over the past few months, demand has begun to shift to more affordable areas, with many choosing to downsize units," Toaima added. Value Strat estimates that Dubai will add 100,000 homes over the next three years, although its entry into the market will be phased.
Meanwhile, rent increases continue to slow.
Residential rents rebounded by an average of 22% this year through July, compared to 22.8% the previous month. The real estate consulting company, CBRE Group, said that this brings the average annual price for a villa to 319,994 dirhams ($87,120) and 105,691 dirhams for an apartment
For a detailed perspective on the property market, visit: Dubai - VPI Residential Capital Values - July 2023