Have Dubai property prices reached their peak?

There are strong signs that the market is maturing, say experts

The outlook for the coming year is further price increases but at a slower rate. Victor Besa / The National

Dubai’s residential property prices are expected to moderate this year, but the market shows no signs of letting up for the foreseeable future, analysts have said.

Favourable interest rates and policies that encourage long-term residency have sustained the market at a time when some thought it might run out of steam.

The outlook for the coming year is further price increases but at a slower pace, according to Haider Tuaima, head of real estate research at Valustrat.

“There will be growth, but at a much lower rate,” Mr Tuaima told The National.

Stringent developer payment plans, restrictions on forward sales and government regulations have effectively mitigated speculative 'flipping' and subsequent value inflation

John Allen,
chief executive of valuation and advisory at Asteco

“At the moment, it’s double-digit growth and we think is going to come down to single-digit growth – between 5 per cent and 7 per cent.”

Last year set new records for value and volume of sales. In September, average prices surpassed the previous peak set 10 years earlier.

The ValuStrat Price Index, which analyses changes in property values, shows property values grew by 19.9 per cent in 2023.

Discovery Gardens (prices up 26.4 per cent), The Greens (24.3 per cent), Motor City (20.7 per cent) and Town Square (19.5 per cent) were the best-performing areas for apartments.

Jumeirah Islands (32.2 per cent), The Palm Jumeirah (31.9 per cent), Dubai Hills Estate (30.6 per cent) and Mudon (27.2 per cent) recorded the largest increase for villas.

Property prices in Dubai's residential segment are expected to continue to ease in 2024 “as savings are being exhausted and pent-up demand is being absorbed”, real estate consultancy Asteco said in its outlook report for 2024.

Meanwhile, property values in Dubai could climb by between 8 per cent to 12 per cent this year, according to Cushman & Wakefield Core.

While more than 39,400 units were delivered in 2023 – the highest since 2020 – it expects 32,100 units to be handed over this year.

Concerns over a possible property bubble – a term used when properties are overpriced – have widely been ruled out by experts, who say the market is showing signs of maturing, thanks to government and banking regulations.

Being a global centre means Dubai's property market “depends not only on local economic strength but also on global investor sentiment and the emergence of new investor markets”, as well as exchange rate fluctuations and geopolitical events, said John Allen, chief executive of valuation and advisory at Asteco.

“Amid these unpredictable market dynamics, sentiment plays a significant role in Dubai's property market and the outlook for 2024 remains positive,” he said.

Interest rates factor

According to Mr Tuaima, “it's mostly positive market sentiment that's currently driving everything” in the market at the moment.

Rising prices have also encouraged more recent buyers to cash in on their timely acquisitions.

“If we look at the sellers’ market … we found that the majority of properties sold were originally bought in 2020, 2021 and even 2022,” he said.

“Many of the sellers have basically doubled their investments, so, of course, they’re going to sell. These are people who bought before or during Covid or just after.”

Daniel Abraham, associate director at real estate broker Espace, said brokers at his company have been waiting for a slowdown.

However, every time it feels like there is a drop in momentum, they see another sharp rise in sales figures, he said.

“It has felt like this most probably for the last year … We keep thinking: When is it going to slow? I must say Q4 [the fourth quarter] felt a little bit hesitant,” Mr Abraham told The National.

“We started to see figures cool off slightly, but then we'd have a bumper week where we would do even more.”

He said interest rates have given “another little bit of confidence to buyers to go out and buy”.

“If the interest rates stayed north of 5 per cent, I think it would have slowed down,” he said.

“The last time I checked, you can get a [mortgage at a] three-year fixed rate of 3.99 per cent. If we go back six months ago, it was 5.25 per cent, so that's definitely made it a little bit more comfortable for people and that's most probably why we've seen it not seen it completely slow down.”

Mr Abraham said several areas have registered a marked increase. He gave an example of Jumeirah Village Triangle where they were selling a two-bedroom independent villa six months ago for about Dh3.2 million ($871,340).

The same units are now selling for more than Dh4 million.

“We haven't seen that slowdown yet and that's really because there is still a high level of demand,” he said.

Market maturing

Five years ago, Dubai established a higher committee for real estate to better balance supply and demand in the market.

The committee ensures semi-government property companies do not compete with the private sector and has a comprehensive plan for all real estate projects in Dubai.

“You don't see major master plans being announced every day or every month even,” Mr Tuaima said.

“What you see launched at the moment are either buildings or new phases of existing master plans. There’s a more calculated approach to launching these projects.

“We have the Dubai 2040 master plan and we know that [the market] needs to double itself between now and then, but everything now is being well calculated, as compared to 2013 and 2014, and that’s why we don’t expect a bubble. We may see a correction, particularly in the high-end villa market.”

Luxury property launches in Dubai - in pictures

The Palm Jumeirah saw the majority of deals in luxury and super luxury sales in Dubai in 2023. AFP

At 450m, the Franck Muller Aeternitas tower will be one of the tallest in the city when complete in 2027. It will feature 649 one, two and three-bedroom apartments, plus duplexes, over 106 floors – all topped by a giant clock. Photo: London Gate

Bayz 101 by Danube will have 1,346 apartments and is the developer's largest project to date in terms of both units and overall space. Photo: Danube Properties

Sharjah property developer Arada has launched sales for its luxury project in Dubai, the Armani Beach Residences at Palm Jumeirah. Prices start at Dh21 million ($5.7m). Photo: Arada

Designed by Japanese Pritzker-Prize-winning architect Tadao Ando, in collaboration with fashion icon Giorgio Armani, Armani Beach Residences features 53 two to five-bedroom residences, plus penthouses and two presidential suites. Photo: Arada

One of the largest private penthouses in Dubai is on sale for Dh600 million. It comprises the three top-three levels and rooftop of Raffles The Palm Dubai Residences. Photo: Emerald Palace Group

Dubai's AHS Properties has launched a $850 million project called Casa Canal, located at Dubai Water Canal. Photo: AHS Properties

Casa Canal will have a mix of residences, including three-bedroom penthouses, four and five-bedroom villas and six-bedroom mansions. Units are priced between Dh22.5 million and Dh185 million and the project is set to be delivered in late 2025. Photo: AHS Properties

Nakheel, the developer behind The Palm Jumeirah, launched the first waterfront villa project on the Palm Jebel Ali in 2023. Leslie Pableo / The National

The launch of properties on four fronds of Palm Jebel Ali offer two types of homes – coral and beach villas, says Nakheel. Photo: Nakheel

Dubai developer Sankari Properties is building a $1 billion ultra-luxury project in Marasi Business Bay. Units will start at $10 million. Photo: Sankari Properties

Damac launched Cavalli Couture on Dubai Water Canal in 2022. The 14-storey building features 70 units, comprising three, four and five-bedroom duplex sky villas and duplex penthouses. Photo: Damac

Jumeirah Bay Island is one of Dubai's prime residential neighbourhoods. Photo: Bulgari

There were close to 50 sales of Jumeirah Bay Island properties in excess of $10 million in 2023.

Also much sought-after is The Mansions, Lanai Islands, Tilal Al Ghaf, Dubai. Photo: Knight Frank

A luxury villa in Dubai's Emirates Hills sold for Dh102.8 million in 2022. Photo: Phoenix Homes

Faisal Durrani, head of research for the Mena region at Knight Frank, said the current figures back the fact that the market is maturing in Dubai.

“The total volume of stock available for sale in the city’s prime residential districts of The Palm Jumeirah, Emirates Hills and Jumeirah Bay Island slipped by 38.5 per cent last year, highlighting the growing shift in buyer type and mentality to buy-to-hold [for longer] and buy-to-stay purchasers,” he said.

“This reflects the city’s growing appeal as a long-term home for expats, which has been further bolstered by the government’s wide range of residential visa options, designed to attract and retain talent.”

Mr Durrani said Knight Frank's survey of global high-net-worth individuals revealed that two thirds of those seeking to buy a property in the emirate would like to use it as a second home.

“This marks a significant departure [from] previous market cycles that were fuelled by speculative activity,” he said.

Mr Allen said Asteco's monitoring of the current cycle had also noted the impact of regulations on the market.

“Stringent developer payment plans, restrictions on forward sales and government regulations have effectively mitigated speculative 'flipping' and subsequent value inflation in this cycle.

“Combined with more robust lending criteria, these measures are expected to provide greater and increased insulation as market conditions continue to stabilise,” he said.

Liam Dawett, sales manager at Betterhomes, said initiatives such as the enhanced visa programme and an influx of mainly end users suggest “future corrections may not result in drastic drops as seen previously”.

“Instead, we may witness a more gradual decline, possibly the longest recorded,” he said.