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Emirates.Estate Explores Worth Investment Option for Dubai Real Estate in 2024

DUBAI - (NewMediaWire) - June 14, 2024 - Over the past 3 years, Dubai's real estate market has set records in terms of transaction numbers and total volume. In 2024, both residential and commercial real estate in the emirate are expected to be profitable investment options. This is due to several factors: government policies, eased conditions for obtaining a Golden Visa, population growth, infrastructure development, and rental yields, which can reach 9% per annum or more.

Dubai Market Development

By the end of 2023, Dubai's real estate market had achieved unprecedented results. Residential real estate alone saw sales totalling AED 314.55 billion (USD 85.64 billion) for the year, marking a 49.7% increase compared to 2022. A total of 118,011 residential units were sold, up 36.4% from 2022.

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Average prices per square metre over 12 months increased as follows:

  • Off-plan villas: up by 17%

  • Ready villas: up by 22%

  • Off-plan apartments: up by 0.6%

  • Ready apartments: up by 4.6%

Mortgages were involved in 33,700 transactions, representing a 41% increase from 2022. The total amount of mortgage loans reached AED 125 billion (USD 34.03 billion), which is 7% less than in 2022.

Rental income brought owners AED 35.97 billion (USD 9.79 billion), a 14.5% increase from 2022.

The overall data proved to be the most impressive. According to the analytical portal DXB Interact, the total volume of all real estate transactions in Dubai amounted to AED 412 billion (USD 112.17 billion) in 2023. This is 56% higher than in 2022 and an absolute record for the local market.

In January 2024, some analysts predicted a potential decline in Dubai's market due to factors such as a possible surge in inflation, unpredictable changes in global banking rates, and the military conflict between Israel and Hamas. However, the market continued to grow in Q1 of this year.

Current State of the Market

According to the Dubai Land Department (DLD), Q1 2024 saw 36,506 real estate purchase transactions, a 17.5% increase from the same period last year.

The total value of these transactions amounted to AED 108.5 billion (USD 29.54 billion), which is 21.9% higher than in Q1 2023. Primary transactions slightly outnumbered secondary transactions, with 18,754 and 17,752 respectively.

Mortgages were used in 8,676 transactions, a 3.2% increase compared to Q1 2023. The total mortgage value reached AED 47.8 billion (USD 13 billion), a significant 52% increase from the same period last year.

The average price per square metre in Q1 2024 was AED 16,135 (USD 4,393), marking a 16.7% increase from Q1 2023, and the highest figure in 10 years.

By the end of April, 11,608 real estate transactions were completed, a 45% increase from April 2023, though lower than the 13,434 transactions completed in March. The total value of April transactions was AED 32 billion (USD 8.71 billion), a 21.5% increase from April 2023.

The majority of transactions were for off-plan real estate, totalling 7,611, or 68% of the overall number. The remaining 3,584 transactions were for ready properties. Off-plan transactions amounted to AED 16.21 billion (USD 4.41 billion), while ready real estate transactions totalled AED 8.72 billion (USD 2.37 billion). The demand for off-plan projects is partially driven by their popularity among investors. Purchasing property under construction allows for resale in 13 years with profits up to 30%.

Zarina Nasimova, Sales Manager at Metropolitan Premium Properties, notes:

"If you buy a ready property and rent it out, the yield in the best case will be from 5 to 10% per annum. A more realistic figure is from 5 to 8%. However, with an off-plan project, the capital gain over the year will be 1015%, depending on the stage of the project."

Mortgages were used 2,180 times in April, 10% fewer than in April 2023. However, the total mortgage volume rose to AED 14.6 billion (USD 3.98 billion), a 31.9% increase from April 2023.

Average real estate prices in April 2024 were:

  • Apartments: AED 1.3 million (USD 350,000), up 13.7% from April 2023

  • Villas: AED 3.4 million (USD 930,000), up 25.8%

  • Commercial real estate: AED 1.2 million (USD 330,000), up 39.9%

  • Land plots: AED 4.1 million (USD 1.12 million), up 27.6%

The average price per square metre was AED 16,480 (USD 4,487), a 19.8% increase from the previous year and the highest April figure in the past decade.

Rents have also risen, with the average cost of renting apartments at AED 74,000 (USD 20,150) per year, up 23.3% from 2023, and villas at AED 170,000 (USD 46,290) per year, up 21.4%.

Experts predict that by the end of the year, Dubai developers will deliver 25,000 new properties, primarily in Dubailand, MBR City, Business Bay, and Jumeirah Village.

Commercial Real Estate

Analysts have observed a slow development in Dubai's commercial real estate market in recent years. However, Q1 2024 suggests a return to previous growth rates. This is evidenced by increased investor interest and heightened leasing activity, experts note.

Amid a global economic slowdown caused by inflation and political instability, analysts highlight that Dubai is capitalising on its strategic location and appealing business environment. This is attracting new investments and expatriate workers, leading to a 28% year-on-year increase in leasing volume for Q1 2024.

According to DXB Interact, 967 commercial real estate units were sold in Q1 2024, a 9.4% increase from Q1 2023, with transactions totalling AED 1.9 billion (USD 540 million). In April, 277 commercial units were sold, an 8.2% increase from the previous year, amounting to AED 470.4 million (USD 128 million) in transaction value.

Experts predict continued growth in the commercial real estate market, driven by significant infrastructure projects, major events, and developments like Expo City, stemming from Expo 2020.

Several new hotels opened in Dubai during Q1 2024, adding 2,000 rooms, primarily 5-star accommodations in Business Bay, Za'abeel, and Port Saeed. The total number of hotel rooms in Dubai has now reached 155,000.

In the retail sector, new commercial properties are anticipated. Analysts expect 120,000 m of retail space to emerge in Dubai and Abu Dhabi by 2025.

Luxury Real Estate

Dubai's luxury real estate market is experiencing one of the highest growth rates in the world. In 2022, this market segment grew by a record 44.4%, followed by a 16.3% increase in 2023.

Houses costing more than USD 10 million remain in high demand within the premium segment. At the end of 2023, such properties were sold in the emirate for a total of USD 7.6 billion, surpassing sales in New York and London. In Q1 2024, 105 transactions for properties in this price range were registered, marking a 19% increase compared to 2023.

A notable characteristic of Dubai's luxury real estate market is its prices that are significantly lower than in other popular cities. For instance, with USD 1 million, you can purchase a property of approximately 100 m in Dubai, whereas in London, New York, and Singapore, the same amount would buy 32 m, 34 m, and 31 m, respectively.

Moreover, projects by Dubai developers offer not just living space but also a range of additional amenities: swimming pools, fitness rooms, spas, yoga areas, beauty salons, shops, restaurants, recreation areas, meeting rooms, and more.

"Many affluent individuals have been flocking to Dubai in recent years, all seeking luxurious living. High-end real estate projects may have, for example, 200 apartments in one building, and each project is unique with no analogues. This is comparable to branded items, clothes, or carsthey always attract wealthy buyers regardless of global circumstances. Investing in luxury real estate means acquiring a rare product that will always be in demand. All luxury projects are unique, selling out and reselling quickly," notes Zarina Nasimova.

British analysts predict that Dubai's luxury real estate sector will grow by 5% in 2024 due to continued high demand.

Best Areas for Investment

According to experts from the Global Property Guide, the average annual return on real estate in Dubai in Q1 2024 was 6.3%.

In the studio segment, the areas with the highest returns were:

  • Jumeirah Lake Towers 9.07%

  • Al Furjan 8.41%

  • Jumeirah Village Circle 8.38%

For 1-bedroom apartments, the highest returns were found in:

  • Jumeirah Village Circle 8.24%

  • Arjan 7.31%

  • Al Furjan 7.29%

In the 2-bedroom apartment segment, the top areas were:

  • Jumeirah Village Circle 7.63%

  • Dubai Marina 6.67%

  • Al Furjan 6.51%

Finally, for 3-bedroom apartments, the areas with the best returns were:

  • Jumeirah Village Circle 7.34%

  • Dubai Marina 6.86%

  • Downtown 5.83%

According to the DXB Interact portal, April 2024 saw the most significant increases in the price per square metre in these communities:

  • Mudon: AED 15,000 (USD 4,100), 38.6% more than in April 2023

  • DAMAC Hills: AED 16,000 (USD 4,400), 30.1% more

  • Al Wasl: AED 30,000 (USD 8,200), 18.6% more

  • Jumeirah Village Circle: AED 14,000 (USD 3,800), 18.2% more

These areas are particularly suitable for purchasing real estate for resale.

Attractive Projects

Among the off-plan projects by local developers, several options stand out as particularly attractive for investment.

Dubai Islands: Developed by Nakheel, this project features apartments, villas, and townhouses, along with shopping centres, 5-star hotels, and pristine beaches.

Dubai Hills: This development offers villas, townhouses, and low-rise apartment buildings. The highlights of its infrastructure include Dubai Hills Park and a large 18-hole golf course.

Palm Jebel Ali: Relaunched in 2023, this ambitious project is twice the size of Palm Jumeirah. It includes more than 80 hotels, a total of 110 km of coastline, and housing for 35,000 families, including apartments and luxury mansions. Although the project is expected to be fully completed in the 2040s, the first properties are slated for completion as early as 2027.

Dubai Creek Harbour: Spanning 2.4 km, this community features 10,000 properties and 500,000 m of public space. It is located near Ras Al Khor Wildlife Sanctuary, home to a large population of pink flamingos. The developer is Emaar Properties.

Rashid Yachts & Marina: Another project by Emaar, this development aims to modernise the waterfront area of Mina Rashid, transforming it into a contemporary living and recreational space. It includes a yacht club, a floating hotel, 6 parks, shopping centres, and coffee shops. Available properties include 1- to 3-bedroom apartments, as well as a limited number of duplexes and townhouses.

Zarina Nasimova shared insights on common mistakes to avoid in Dubai's real estate market:

"The main mistake is when an investor does not independently research the project, doesn't delve into the details, and simply trusts the first agent they encounter. I always strive to explain to clients which investments are currently more profitable and what they should anticipate. After all, it's their money! It is crucial that investors also familiarise themselves with investment legislation, understand what a service charge is [regular payments that owners make for building or community maintenance], and know that it must be paid by the property owner. Sometimes people assume that the real estate market in another country is similar to their home market, but this is not the case," explains the expert.

Forecasts and Prospects

In April, Dubai experienced historic flooding due to the heaviest rainfall recorded since meteorological observations began in the UAE in 1949. The rain persisted for about 24 hours. In response, local authorities have announced initiatives to enhance the city's drainage system.

Despite the flooding, experts believe that the demand for real estate in Dubai is unlikely to wane. While there might be a temporary decline in demand in the areas most affected by the flooding, analysts predict this will only last a few months.

According to the government's Dubai 2040 project, the emirate's population is expected to increase to 5.8 million by 2040, up from 3.68 million in 2024. To accommodate this growth, developers will need to deliver approximately 54,400 homes per year. However, experts estimate that only 200,000 real estate units will be built over the next 5 years, leading to increased demand due to the limited supply.

What Determines Market Growth?

Several key factors influence the growth of Dubai's real estate market. Experts highlight the following:

  • Government policy: The emirate actively welcomes foreign investment, establishing numerous freehold areas where foreigners can purchase property with full ownership rights.

  • Visa conditions: Residency can be obtained for 2 years with an investment of AED 750,000 (USD 204,000).

  • Legacy of Expo 2020: The international exhibition, which concluded in March 2022, left behind a well-developed infrastructure, enhancing Dubai's appeal to foreign investors.

  • Tourism: According to the UAE Tourism Strategy 2031, 40 million guests are expected to stay at UAE hotels annually by 2031.

  • Sustainability and innovation: The incorporation of high technology and green practices in construction attracts buyers interested in modern, environmentally friendly housing.

  • Digital transformation: Dubai's real estate market leverages VR room tours, cryptocurrency payments, and AI-powered market trend analysis.

  • Growing demand for luxury real estate.

Zarina Nasimova also identifies several factors contributing to the growth of Dubai's real estate market:

  • High level of security.

  • Many branches of international universities that provide quality education.

  • Almost complete absence of taxes, attracting investors and stimulating the influx of foreign companies.

  • Stable exchange rate of the local currency against the dollar and euro.

  • Warm climate that attracts tourists who want to spend the winter in comfortable conditions.

Expert Forecasts

Analysts predict further growth for the market by the end of 2024. For example, Bas Kooijman, CEO and Asset Manager of DHF Capital S.A., noted that the market will grow by another 5% in 2024. Over the same period, the UAE economy should show growth of 4.5%.

A more cautious forecast from British experts suggests the market will grow by 3.5%. They cite potential risks such as a slowdown in global economic growth, increasing global inflation, and consequent hikes in global bank rates, which could negatively affect demand.

According to Zarina Nasimova, real estate prices in 2024 will most likely increase by 515%. While this is less than the growth seen in 2022 and 2023, it indicates that the market is stabilising.

Hussain Sajwani, Founder and Chairman of DAMAC Properties, stated in an interview with the Al Arabiya news portal that the market is experiencing stable transaction levels across all key projects, alongside a steady increase in demand.

The businessman noted that his company launched more than 20 new projects in Dubai in 2023, reflecting his confidence in the emirate's economy. He believes all fundamental economic factors point to healthy market growth. Additionally, external circumstances have little to no impact on the market due to government measures that have made Dubai attractive for both investment and living, Sajwani said.

However, there are less optimistic forecasts. For example, Mahmoud Kreidie of the BSA law firm, speaking to Al Arabiya, warned investors that the market's growth might be nearing its end. He noted that the continuous emergence of new projects could lead to an oversupply, resulting in a market downturn and a correction in prices.

Other experts argue that the risk of oversupply is low due to the emirate's growing population.

"I don't see an oversupply of vacant housing that is not in demand or that no one is renting. It doesn't matter in what part of Dubai the apartment or house is located, there will always be someone who wants to rent it. Very rarely does a situation occur when a client wants to buy an apartment for personal use [on the secondary market] and it is immediately available. Usually, any property in Dubai is rented and not idle," said Zarina Nasimova.

Mahmoud Kreidie added that there are lucrative opportunities ahead for investors in the near future. Traditionally, there is a lull in the market in the summer, potentially leading to a temporary price drop followed by a rise due to the increasing cost of living in the emirate. This combination of factors creates a profitable scenario for investors looking to invest in Dubai real estate for the long term.

Conclusion

The outlook for the market of property in Dubai appears promising. Building on a successful 2022 and an impressive 2023, 2024 continues to witness a surge in both transactions and prices. This trend is underpinned by Dubai's allure amidst global political uncertainties, its burgeoning population, the persistent demand for luxury properties, and the streamlined process of acquiring long-term visas.

At the year's outset, experts anticipated a market slowdown, citing several adverse factors. However, by the end of Q1, transactions surged by 17.5% compared to the same period in 2023, with the total transaction value spiking by 21.9%.

Forecasts commonly predict a 5% increase in prices for 2024, with a more cautious estimate hovering around 3.5% for the overall market and 5% for the luxury real estate segment.

While many anticipate a price correction in the summer of 2024 due to the seasonal lull, subsequent price rebounds are expected due to Dubai's escalating cost of living. This presents an opportune moment for investors eyeing long-term real estate investments in the emirate.

Media Info:

Name: Oliver Acker

Organization: Emirates.Estate

Website: https://emirates.estate/

Email: info@emirates.estate

Address: 27 level, Al Saqr Business Tower, Sheikh Zayed Road, Dubai, UAE.