Is Dubai market sustainable ?

The Resurgence of the Dubai Property Market – Is It Sustainable?

The real estate market in Dubai recorded growth in the 6 years between 2002 and 2008 of 162% during what was termed as the ‘gold rush’ where investors gained significant short-term growth. Now, those big numbers are back with headlines to match but, the question on every would-be investors lips is whether the Dubai property market is sustainable long term?

A Record Breaking 2021

During 2021 property sales totalled AED 151.07bn a massive 110% more than the previous 12 months with the number of transactions increasing from 2020 to 2021 by 75%. These two elements combined broke a 12-year record in Dubai’s property market history. Interestingly there was a reasonably even split of 60 -40 in relation to complete/secondary vs off plan property.

2022

Despite investor concerns that 2021 figures were likely the prelude to a ‘bust’ cycle, Dubai has demonstrated a sustained growth throughout 2022. Quarter one started with over 20,000 property purchases, the largest number of property transactions in Dubai’s entire history.

Off plan sales in the first quarter showed a dramatic increase of 100% with the resale market evenly balanced with an increase of 95%. This was further supported with a 20% year on year increase in the price of villas and a sturdy 10% in the price of apartments.

Quarter two demonstrated a similar level of buoyancy. In June alone, 8.8 thousand property transactions totalling AED 22.75bn, the highest volume of sales since June 2012 were recorded.

The second quarter itself saw 22,504 property transactions totalling AED 59.15bn up 45.9% against the same quarter in 2021. Similarly, Q3 saw significant growth in the value of transactions increasing to AED 69.49bn. Industry experts expect a similar level of growth in Q4.

2023 and Beyond

Noone knows for sure how long this ‘boom’ will last for the Dubai housing market and, as this is only the third cycle for its real estate market, unlike with other major world cities, it is hard to make comparisons historically.

However, the Dubai government have actively sought ways in which to help sustain the current buoyancy of the market, these include residency permits for retirees and more prominently, the increase of the visa programme to 10 years. The eligibility of this scheme has become more accessible and flexible where ex pats can gain residency when purchasing off plan assets and property with a mortgage.

Sustained Growth

There are a number of other factors that point to sustained growth far beyond the UAE’S usual revenue from oil as it moves into a more diverse economy. The huge success of the 6-month 2020 Expo has led to upturn in GDP forecasting with economic growth predicted at 6.2% in 2022 increasing on that of 2021 at 5.2%.

Employment has also felt a positive impact with job opportunities increasing by 3.5% in 2022 and rental demand set to continue increasing at its fastest rate since October 2014.

Experts believe that after this significant boom the property market will level out over the next few years. It is believed that the record growth Dubai is currently seeing is because of Dubai moving so quickly to get 95% of its population vaccinated post Covid, and the huge wave of investment and commercial activity following Expo 2020.

Whilst this may well be the case, the attraction of high nett worth investors in purchasing second homes in Dubai is now being matched by those looking for investment property for the purpose of long- and short-term rental or to sell for profit as the market demand increases. This lack of inventory will have a direct impact on the market as a whole but should especially trigger even more interest for investors in prime off – plan property where a significant return on investment can be achieved over time.

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