Luxury home prices in Dubai surged 44 per cent in 2021, driven by higher demand from wealthy buyers as the emirate’s property market continues to rebound from the coronavirus-induced slowdown on the back of government initiatives and the country's effective handling of the pandemic.
The record increase in luxury home prices helped Dubai rank first in Knight Frank’s Prime International Residential Index 100 rankings, which analyses prime price performance in 100 cities and second-home markets worldwide.
“The relentless demand from the world’s wealthy has fuelled a spectacular turnaround in the fortunes of Dubai’s residential market, with the decisive handling of Covid-19 by the authorities attracting the attention of global investors,” said Faisal Durrani, partner and head of Middle East Research at Knight Frank.
“And in a sentiment-driven market, this has helped to spectacularly mark the start of the city’s third property cycle. It’s unlikely the growth of 2021 will be repeated this year, but with such limited prime stock, the top end of the market still has room for growth”.
The UAE property market, which softened owing to a three-year oil price slump that began in 2014 on oversupply concerns and the ensuing pandemic, is on a rebound as people move to larger homes with outdoor amenities amid a surge in remote working and online learning.
In addition, economic support measures and government initiatives — such as residency permits for those who have retired and remote workers, as well as the expansion of the 10-year golden visa programme — have also helped to improve market sentiment.
“Dubai’s investments in world-class infrastructure, health and education, coupled with the exceptional lifestyle and amenities, from the world’s best restaurants and hotels, have helped transform the city into a destination that people want to own a property in,” said Andrew Cummings, partner and head of prime residential at Knight Frank Middle East.
“To add to this, at the top end of the market, quality is now the watchword with developers building super-prime properties to cater to the demands of the global elite, who over the last year have shown themselves eager to own a home in Dubai.”
Moscow, with price growth of 42 per cent, fuelled by Russia’s mortgage subsidy programme and tight supply, was ranked second in the list of markets seeing a growth in luxury house prices, while San Diego, Miami and the Hamptons were placed at numbers three, four and five, respectively.
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The availability of cheap finance owing to low interest rates, a shortage of prime stock, rising wages and accrued savings because of pandemic lockdowns have driven demand for luxury property globally, according to Knight Frank. More flexible working patterns, as well as a reassessment of housing needs and lifestyles and record bonuses, are also fuelling demand.
“Far from running out of steam, this year we will see the luxury housing boom endure,” said Liam Bailey, global head of research at Knight Frank.
“Dubai, Miami and Zurich lead our 2022 forecast, with prime prices expected to end the year between 10 per cent and 12 per cent higher. Asian cities are expected to trail slightly, but even here, prices will grow.”
The value of the Knight Frank Prime International Residential Index increased by 8.4 per cent in 2021, up from just under 2 per cent in 2020, its highest annual increase since the index began in 2008.
Of the 100 luxury markets tracked, only seven registered price declines in 2021 and a record 35 per cent of locations witnessed price increases of 10 per cent or more, “underlining the strength of the sellers’ market during the pandemic”, according to Knight Frank.
The value of property deals in Dubai more than doubled last year and breached a 12-year record in terms of real estate sales transactions, buoyed by demand in the secondary real estate market.
The emirate registered 61,241 sales transactions worth Dh151.07 billion ($41.13bn) last year compared with Dh71.87bn worth of transactions it closed in 2020, making 2021 the best year for total transactions since 2013 and the highest in value since 2009, according to Property Finder.
Prices of apartments in Burj Khalifa, the world’s tallest building, rose 23 per cent last year as wealthy individuals continued to buy property in Dubai amid a recovery in the property market.