Property prices in the UAE are expected to continue rising amid higher demand from buyers but there could be a turn in the second half of 2024 that could affect the luxury market, according to developers and analysts.
In Dubai, the commercial and tourism hub of the Middle East, average residential prices are projected to increase by 5 per cent to 7 per cent, while in Abu Dhabi, prices will rise by 3 per cent to 5 per cent, Haider Tuaima, director and head of real estate research at ValuStrat told The National.
“In the next three to four months, the market will continue to be strong in terms of transactional activity, in terms of price appreciation and rental increases,” Mr Tuaima said.
However, in the middle of next year, probably in summer, “we could see an inflection point where we could see a turn in the curve and if it happens then it will hit the high-end luxury market first”, he said.
“Will it stabilise that market or will it start [a] price correction is something we don't know. But it is very possible, highly likely, that we will see some change in the direction of the high-end luxury market.”
The UAE’s property market remained strong this year with transaction volumes rising both in Dubai and Abu Dhabi amid government initiatives such as residency permits for retired and remote workers and overall growth in the economy.
Dubai recorded 116,116 new property transactions worth about Dh429.6 billion ($117 billion) in the first nine months of 2023, according to the latest data from the Dubai Land Department.
Total transactions in the emirate increased by 33.8 per cent on an annual basis, while values rose more than 36.7 per cent during the period.
Property deals also grew in Abu Dhabi amid higher demand from domestic and GCC investors.
Abu Dhabi recorded 10,557 real estate transactions worth Dh46.33 billion in the first half of 2023, the emirate's media office reported in July, citing data from the Department of Municipalities and Transport.
The value of the deals more than doubled during the six months while the volume of transactions, including property sales and mortgages, rose by 41 per cent on an annual basis.
In Dubai, residential prices rose by 19.6 per cent annually in the third quarter, with average apartment and villa prices increasing by 19.7 per cent and 18.9 per cent, respectively, according to CBRE.
In November, average apartment prices in Dubai increased by 18.3 per cent annually to Dh1,374 per square foot, while villa prices grew 22.2 per cent to Dh1,679 per square foot, a separate report from CBRE said this month.
The world's super-rich are also spending heavily to purchase property in the UAE, aiding growth in the real estate market.
Global high-net-worth buyers plan to spend $2.8 million on average on Abu Dhabi property due to strong economic growth and quality infrastructure in the emirate, a Knight Frank survey found in June.
“The macroeconomic sentiments for the UAE remain favourable,” Swapnil Pillai, associate director of research at Savills Middle East, said.
“The non-oil sectors have seen significant expansion over the past two years … [and] remain healthy and are well positioned to grow over the next twelve months,” affecting the real estate sector positively, he said.
However, there may be a risk of oversupply for select assets across a few locations, which “may limit any significant increase in average prices going forward”, he added.
The UAE’s economy is expected to expand by 3 per cent this year and 4 per cent next year, driven by strong growth in its non-oil sector, rating agency Standard & Poor's said in a September report.
Vital contributors to the country's economic growth next year will include the wholesale trade, industry, real estate, construction, financial services and tourism sectors, as well as oil and gas, it said.
“As world economies open up, more travel is expected and investments to Dubai are expected to go up,” Ravi Menon, co-chairman of Sobha Group, which is building the $4 billion Sobha Hartland master development in Dubai said.
“Our largest investors are typically from India, China, UK, the CIS (Commonwealth of Independent States) markets and rest of Europe and this trend is expected to continue.”
Investors from Latin America, Mexico and Canada are also expected to invest in the emirate's property market, which will help grow the demand further, he added.
Demand from Chinese investors is also expected to rise next year as the world’s second-largest economy recovers from the pandemic lockdowns.
“The outlook for Dubai’s residential real estate market in 2024 remains positive, driven by sustained interest from both local and international investors,” Nick Witty, chief executive of Chestertons Mena, said.
He projects continued demand for ready-to-occupy properties when compared to off-plan properties as they “offer more immediate returns on investment as they can be rented out immediately”, he added.
Off-plan sales for the first nine months of this year totalled Dh100 billion and ready-homes sales for the period reached Dh104.9 billion, according to Knight Frank's report in November.
New units are expected in the market next year, but demand will outstrip supply, supporting prices, according to analysts.
Developers are planning to deliver 120,000 units in Dubai in the next five to six years with 20,000 to 30,000 units a year, while in Abu Dhabi, 5,000 units will be ready for delivery next year, according to Mr Tuaima.
“For this year, about 45 per cent of these units [in Dubai] have been delivered on time with 55 per cent being delayed, which is kind of a blessing in disguise, because if all the units are delivered on time that will create a glut of supply and therefore drive prices and rents down,” he said.
Developers including Aldar Properties, Damac Group, Omniyat and Sobha are developing new projects as demand continues to remain strong.
In November, Aldar generated Dh3.1 billion from the sale of 786 villas and town houses at its first residential development in Dubai. The first two phases of the project were sold out on strong demand.
“Delivery of new homes are expected to come in the market in 2024, however the property demand still far outstrips the supply hence property prices will continue to remain stable,” said Mr Menon.
For a detailed perspective on the property market, visit: Dubai - VPI Residential Capital Values - November 2023