The fast-approaching 2022 World Cup has been heralded as a potential boon to nearby Dubai’s luxury property market—but it might be the last uplift before an impending slowdown, experts say.
Held for the first time in the Middle East, the soccer tournament will run from Nov. 20 to Dec. 18 in Qatar. But with limited accommodation on offer, many fans will be basing themselves in nearby cities such as Dubai, potentially leading to a boost in sales of luxury real estate in a white-hot market that is already leading the world in housing price gains.
“Because of the nature of the event, it’s attracting a lot of high-net-worth individuals,” said Jeff Raju Kuruvilla, sales manager at Positive Properties, a Dubai-based brokerage. “I’m already getting a lot of calls from people who are attending the World Cup who are asking us about accommodation options, as well as the investment options… Once they’re free from the World Cup, I will be showing them the new projects that are being launched here in Dubai.”
Around 1.5 million fans are expected to attend the tournament in Qatar. A shortage of accommodation means that the spillover is expected to stay in the United Arab Emirates—primarily in Dubai.
Qatar Airways and Flydubai will be operating up to 54 approximately one-hour flights a day between Dubai and Qatar, allowing fans to fly out for a match and return the same day.
Even fans who are planning to stay in Qatar are expected to spend time in other destinations, with the number of visitors planning to spend at least two nights in Qatar and then at least two in another Gulf country rising 16 times compared to pre-pandemic travel patterns, according to statistics compiled by travel data firm ForwardKeys.
“Dubai is the biggest beneficiary of this trend by far, capturing 65% of onward visits,” the firm said in an October report.
“People will come here, stay in hotels or Airbnbs or whatever, they’ll go and watch the matches, come back and spend two or three extra days, and that will make it easy for them to consider Dubai as an investment for property,” said Shabna Ibrahim, an investment consultant with Dubai-based brokerage A1 Properties.
Tourism linked to the World Cup is expected to provide a huge boost to Dubai’s hospitality sector, including its short-term rental market, but brokers are also anticipating an impact on luxury-residential real estate, which has undergone a boom since the onset of the pandemic, with prime properties in some neighborhoods almost doubling in price.
“We are expecting an increase in property sales during the World Cup period,” said Honey Deylami, executive partner at Luxhabitat Sotheby’s International Realty in Dubai. “We have seen historical transactions during heavy tourism periods, which has shown us that a reasonable number of visitors to Dubai usually end up investing in real estate after experiencing the luxury, comfortable lifestyle, safety and security, as well as the tolerance and diversity of the city.”
Mr. Kuruwalla said he is expecting the tournament to give Dubai’s prime real estate sector a similar boost to Expo 2020, a world fair that ran from October 2021 to March 2022, increasing international tourism by 214% and attracting a total of 24 million visits to the event, according to government data.
“Because of Covid, the prices were significantly down in Dubai real estate, but as soon as the Expo started they jumped,” he said. “I can see a similar demand right now with the Qatar World Cup.”
But with luxury real estate comprising just 5% of Dubai’s property market, World Cup-related sales are unlikely to have a significant impact on the market overall, cautioned Haider Tuaima, director of real estate research at ValuStrat, an international consulting group based in Dubai.
Tourism boosted by the six-month-long expo was on “a much larger scale than the World Cup,” he said. “As far as Dubai is concerned, I think there will be an impact, but whether it’s significant or not? I doubt it.”
The impact will in part be lessened by the fact that Dubai has already witnessed a soaring increase in both demand and prices for prime and ultra-prime properties over the past two years, after an initial dip during the early months of the pandemic. “We saw a clear trend of end users as well as investors opting for larger homes: villas, townhouses or larger apartments,” he said.
Property prices in the Jumeirah Islands have risen an average of 96% since the third quarter of 2020, he added. In Palm Jumeirah, where the majority of the city’s mansions are located, prices rose on average 90%, and Downturn Dubai saw price increases averaging 87% in the prime sector, he said. Growth slowed slightly from 2021 to 2022, but the overall prime real estate sector surged 88.8% in the 12 months through September this year, leading Knight Frank’s global index.
Lockdowns in many countries made travel for overseas buyers difficult throughout much of 2021, meaning that the initial surge in demand for prime properties was driven largely by domestic buyers, Mr. Tuaima said.
But international investors have returned to the market in the past year, in part boosted by Dubai’s visa reforms, expanding them in November 2020 to grant renewable five- or 10-year residency permits to investors, entrepreneurs and certain professionals, as well as to anyone investing more than AED 2 million (US$544,500) in real estate.
“We are seeing an influx of ultra-high-net-worth buyers looking to call Dubai home as a primary residence,” Ms. Deylami said. “Migration and investment of ultra-high-net-worth individuals from across the globe to Dubai during and after the pandemic, and very limited supply of premium products such as luxury penthouses and mansions, are the main factors for increased sales prices and demand for luxury property in Dubai.”
Rental prices have also climbed sharply since the onset of the pandemic. Average apartment rents were up 24.9% year-on-year in August, according to real estate services and investment firm CBRE. Although they remain around 20% below the last peak in 2014, Mr. Tuaima said, “the fact that rent is increasing is actually giving a further boost to sales, because rather than paying rent every month it’s better to take out a mortgage.”
The U.A.E. has raised interest rates in tandem with the U.S. Fed in recent months. Uncertainty surrounding mortgage repayments has pushed some buyers toward off-plan properties that offer fixed-rate payment plans, he added.
Changes to the residency visa rules have also made off-plan properties more appealing for overseas buyers.
“Before July this year, the rule was that you had to have a property that was ready,” Ms. Ibrahim said. “Now the rule has changed.” Off-plan properties are now included in the visa scheme, along with properties purchased using loans from certain local banks.
Overall, rising interest rates are not expected to have much impact on the prime market, due to the prevalence of cash buyers. “Statistically, only 19% of all sales are mortgage based, so you’re talking about 81% cash transactions,” Mr. Tuaima said.
After two years of rapid growth, he expects property prices to stabilize over the coming year.
“In the last six months, there has been a slowdown in capital growth. It was about 5% per quarter. Now, we’re talking about 3.6% or 3.5%,” he said. “There are some areas that may have reached their price ceilings already.”
There are already signs of a slowdown in the lower-end market, where there’s been very little price movement for a whole 12 months, he added.
While the strength of the US dollar has advantaged some buyers, the weakening of the euro has lessened the purchasing power of others. “We are simultaneously working on educating our clients on both sides of the fence on the changing market conditions, the euro depreciation, as well as the global market meltdown that has occurred in the stock market,” Ms. Deylami said. “We are still very bullish on the Dubai property market.”
She anticipates that the prime market will stabilize next year, with some continued price growth in the luxury sector due to high demand. “There is still a shortage of prime real estate in Dubai,” she said. “We are having enquiries on a daily basis for ready luxury units and very limited availability which is pushing the prices for ready available units much higher. I expect the same trend throughout 2023.”