Property prices in Dubai’s prime markets to grow 5% next year, Knight Frank says

Average property prices across the emirate grew by 19 per cent on annual basis in third quarter

Property prices continued to appreciate in The Palm Jumeirah. Pawan Singh / The National

Dubai's prime residential market is set for strong growth, driven primarily by supply limitations and resurgence in demand from key source markets such as China and India, according to a new report.

Property prices in the emirate's prime markets, including The Palm Jumeirah, Emirates Hills and Jumeirah Bay Island, are expected to rise by 5 per cent next year, Knight Frank said in a report on Monday.

Prices in other segments of the residential market are projected to grow at 3.5 per cent.

In the third quarter of this year, average residential property prices across Dubai grew by 19 per cent on an annual basis and 5 per cent when compared to the previous quarter, with the cumulative increase hitting 30 per cent since the first quarter of 2020.

Apartment prices rose by 19 per cent annually during the third quarter, while villa prices jumped by 18 per cent.

For the first nine months of this year, average residential prices grew by 15.6 per cent on an annual basis.

“Dubai’s prime markets remain highly sought after and are responsible for 4.8 per cent of transactions by the total value that have taken place in the first nine months of 2023,” Faisal Durrani, partner and head of research for Mena, said.

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 surged 33.8 per cent on an annual basis, while values rose more than 36.7 per cent during the period.

Dubai's property market has made a strong rebound from the coronavirus-induced slowdown, helped by government initiatives such as residency permits for retired and remote workers, and the expansion of the 10-year golden visa programme.

The emirate’s residential market recorded its highest quarterly price rise in a decade in the third quarter amid higher property demand in Dubai, a report by property consultancy ValuStrat found.

Dubai apartment prices rose by 19 per cent annually during the third quarter. Pawan Singh / The National

The ready homes market continues to dominate, Mr Durrani said, adding 51 per cent of transactions “between the first quarter and the third quarter were secondary market sales, reflecting the high proportion of end-users and second-home buyers in the current market cycle”.

Off-plan sales for the first nine months of this year totalled Dh100 billion and ready homes sales for the nine-month period reached Dh104.9 billion, according to Knight Frank.

Apartments in Dubai South have recorded one of the strongest growth rates, with prices increasing by 73 per cent annually in the third quarter, according to the report.

Following closely are Jumeirah Lakes Towers (67 per cent) and Umm Suqeim Third, also known as Madinat Jumeirah Living, at 37 per cent.

Jumeirah Islands recorded a 65 per cent annual increase in villa prices in the third quarter now standing at Dh2,680 per square foot, “establishing itself as the neighbourhood with the most rapid increase in villa values”, the report said.

Additionally, Dubai South's villas have recorded the most significant quarterly price change, soaring by 33 per cent in the third quarter.

“Our forecasts are not without risk,” Mr Durrani said.

“A global economic slowdown and the knock-on impact on the local economy, combined with the risk of an escalation in regional tensions are medium to high risks, with the latter potentially emerging as a key catalyst for higher oil prices. This in turn could fuel global inflation and higher interest rates, which could drive up borrowing rates further and therefore dampen demand.”

Presently, there are 77,864 homes (excluding branded residences) under construction, scheduled for delivery by the end of 2028, with an annual average of approximately 13,000 homes over the next six years, considerably below historical completion rates.

“When it comes to an oversupply of homes, this is a lower risk to the market," he said.

"In our view, the city remains undersupplied, particularly given the population growth projections and the dearth of new homes in prime neighbourhoods as well as in the upper echelons of the price spectrum."