Is it too late to invest in Dubai’s luxury real estate market?

by Editor

If you want to invest in luxury real estate in Dubai this year, you should be ready for what could be a record-setting year for capital values.

The UAE’s demand is being aided by a restricted supply of properties at the high end of the market, visa liberalization, and the function of property as an inflation hedge, even as the pandemic-fueled global real estate bubble starts to slow down.

According to Chris Whitehead, managing partner at Luxhabitat Sotheby’s International Realty, which sold two of the highest-value villas this year, the increase in the market since 2021 is still ongoing, making many appraisers and sellers price homes in expectation of an upward trend.

There is at least a 3:1 buyer to desired property ratio as a result of this and the decreased availability in the luxury home market.

Naturally, this leads to each transaction pushing the limits even farther, which is why we are seeing an increasing number of record transactions.

Over the previous 12 months, capital values in Dubai’s residential market have increased dramatically, especially at the upper end of the secondary market.

CBRE noted that prices in the larger residential market rose 10.9 percent in the year to May 2022.

Prices for villas increased by 19.8%, while those for flats increased by 9.6%.

However, according to research by the international consultant Knight Frank, the price of premier residential apartments in the Palm Jumeirah, Emirates Hills, and Jumeira Bay Island increased by 58.9% over the previous 12 months.

It calculates that just the sales of villas and apartments between January and May 2022 totaled Dh61.9 billion ($16.85 billion).

According to Faisal Durrani, head of Middle East research at Knight Frank, villas remain highly sought-after, not just by domestic purchasers but also by foreign high-net-worth people who continue to travel to the city to scoop up the emirate’s most opulent houses.

According to a survey of 13 real estate industry analysts conducted by Reuters on May 30, overseas investors are mostly responsible for the overall sales growth.

Mira Estate, a real estate consulting firm in Dubai, says that Europe and India are still important sourcing markets.

As lockdowns pushed individuals to reevaluate their priorities, economic measures like quantitative easing and low interest rates fueled real estate demand around the world throughout COVID-19.

Ari Kesisoglu, president of listings website Property Finder, says, “One could say the UAE was ready for this change and has the right solutions for local and international high-net-worth buyers, with multiple new developments located on the periphery of the city’s epicentres, which promised housing solutions with an enhanced community experience.”

Prices have increased as a result of government efforts, including the extension of the 10-year Golden Visa program and new forms of residency permits for seniors and distant employees.

The high-profile Expo 2020 Dubai and a quick COVID-19 immunization campaign helped to significantly boost investors’ perceptions of the UAE.

According to Peter Smithson, sales director of Belleview Real Estate, Dubai provides more lifestyle, security, and value for money than other major cities around the globe.

Investors have now added stability to that list as a result of the government’s reaction to the pandemic, according to Mr. Smithson.

According to his analysis of other countries’ responses, this extra stability is a crucial factor in encouraging high-net-worth individuals to migrate to Dubai, driving up demand for the luxury segment and ultimately generating a sharp spike in property prices.

When Belleview sold a 10-bedroom beachfront mansion on the Palm Jumeirah for Dh280 million ($76.2m), it broke the previous record for a real estate transaction in Dubai. The transaction exceeded the previous record of Dh185 million, which was achieved in 2015.

Increasing prices may also be a factor in Dubai. Because the asset class often has little connection with equities and bonds, real estate is seen as a conventional buffer against price increases.

Dubai’s annual inflation rate increased to 4.6% in April from 1.1% in December 2021.

Residential property in the emirate is still a great inflation hedge, according to Knight Frank’s analysis, with price rises predicted to be between 5% and 7% for Dubai’s mainstream market and 14% to 15% for top homes this year.

Given the intense demand for top-end luxury residences and the severe dearth of available properties for sale in the sector, Mr. Durrani predicts that prime and ultra-prime homes would do better even if the market as a whole is expected to be more restrained.

Inflation, on the other hand, has controlled the record property values that were sparked by more than ten years of ultra-low rates internationally.

Some pickier purchasers are looking for reasonably priced luxury homes outside of the city center.

The Valley, Akoya, Dubai Hills Estate, Town Square, and Dubailand are places with more affordable rates that Mr. Kesisoglu highlights.

The Dubai Land Department reports that sales in the Emaar neighborhood of Dubai Hills have reached more than Dh3 billion so far this year.

According to information gathered for The National by real estate platform Property Monitor, there have been 10 sales valued at more than Dh75m apiece since the year’s beginning, the majority of which took place between March and May.

They were all located in the upscale neighborhoods of Palm Jumeirah, District One, Emirates Hills, Dubai Hills, and Jumeira Bay.

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