Since the beginning of 2022, the Dubai real estate market has been on an upward spiral – as the escalating numbers of transactions indicate its post-pandemic stellar recovery. Meanwhile, property prices continued rising from the beginning of this year – as the Dubai real estate market made a strong comeback from the COVID-19 led temporary halt.
The demand for properties for sale in Dubai has tremendously increased over the past 12 months and so are the prices. Average residential property prices increased by 10.9 per cent in the year to May 2022 and when these prices are further classified; the apartment prices rose by 9.6 per cent and villa prices went up by 21.0 per cent.
Dubai real estate market recorded AED22.7 billion of sales in June 2022, which is the highest sales figure in the last 13 years. According to the data obtained from the Dubai Land Department (DLD), this is almost 71 per cent of the total sales volume in 2021.
If these figures are compared to May 2022, the transactions are 32.88 per cent higher in volumes and 24.21 per cent in terms of value – on a sequential basis.
In the second quarter of 2022, the Dubai property market recorded transactions amounted to AED59.29 billion that are up by 6.81 per cent compared to Q1 2022. When compared to June 2021, the property transaction figures were 41.23 per cent higher in sales volume and 54.9 per cent up in value.
We have recently witnessed an incredible increase in demand for Dubai luxury properties, in the past 12 months. This demand has led to a steep increase in these property prices, around 60 per cent – during the same period. It is also notable that a few luxury properties are priced at AED300 million or even more.
Recently, a developer announced the construction of six luxury villas on the “Billionaire Row” of The Palm, with prices set from AED120 to AED300 million.
The top three luxury communities in Dubai in terms of demand in June 2022 were Dubai Marina, Jumeirah Golf Estate, and Downtown Dubai.
The average sales price for properties in Dubai Marina in June was AED1.9 million, AED6.4 million in Jumeirah Golf Estate and AED1.4 million in Downtown Dubai, respectively.
These are the highest transactions both in terms of numbers and volumes and prior to this, June 2009 was the highest grossing month in Dubai real estate sector – both in terms of sales volume and value.
Several real estate agents denote this significant growth in prime areas of Dubai to the strong demand from both local and foreign property buyers and a particular shortage of supply in this segment.
Dubai has experienced consistent growth month-on-month and quarter-on-quarter basis, despite local and global macroeconomic conditions.
“If we look at the numbers of transactions that took place during the first half of 2022, we have touched 71 per cent of total sales volume of 2021 – which is significant. Moreover, this trend will not slow down in a few years to come,” Mustafa stated further.
Another notable factor is that there is an almost 50 per cent decline in the number of ultra-prime properties in Dubai coming to the market for sale, compared to the numbers recorded in May 2021. The demand for Dubai luxury properties is increasing but the supply has become stagnant. Mostly because, the property owners of these luxury properties are holding on to their assets, as having no apparent reason to sell these properties.
Inflation has become a global issue, as the consumer price index in UAE rose by 2.5 per cent in 2021, according to official data. Inflation in Dubai has reached to annual of 4.6 per cent in April 2022 from 1.1 per cent in December 2021. Still, the level is relatively “tame” compared to the rest of the world.
The UAE Central Bank has raised its interest rate by 50 basis points in May 2022, following the US Federal Reserve board’s decision to increase its key interest rate. And these rates are expected to increase during the rest of this year.
However, property consultancy firm Knight Frank stated that the rise in interest rate is not likely to affect the stability of the Dubai real estate market. Mostly because, mortgage buyers accounted for about 18 per cent of the total deals conducted in the first half of 2022, by the value of deals, compared to about 40 per cent in 2021 and 52 per cent in 2007.
“Right now, the bulk of deals at the top end of the residential market are cash purchases, in large part due to the unrelenting influx of ultra-high net worth capital targeting Dubai’s most expensive homes,” according to Knight Frank’s report. “A persistent and intensifying wave of UHNWI capital from markets as varied as Monaco, Singapore, Hong Kong, Austria, Switzerland and even mainland China continues to zero in on the emirate’s residential real estate market.”
However, we can expect that property buyers will continue investing in Dubai properties because these assets prove to offer a significant hedge against inflation.