Dubai property price growth may slow but market bubble fear unfounded, say experts
▶ Market ‘is showing signs of maturing’ thanks to regulations set by government authorities and banks
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 longterm residency have sustained the market amid speculation that 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.
“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,” Mr Tuaima told The National.
Last year, property sales set new records in terms of value and volume. In September, average prices surpassed the previous peak set 10 years earlier.
The ValuStrat Price Index, which analyses changes in property values, shows they grew by 19.9 per cent in 2023.
In terms of prices, Discovery Gardens (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 in villa prices.
Property prices in Dubai’s residential segment are expected to ease further this year “as savings are being exhausted and pent-up demand is being absorbed”, real estate consultancy Asteco said in its outlook for 2024.
Meanwhile, property values in Dubai could climb by between 8 per cent and 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.
Rising prices have also encouraged more recent buyers to cash in on their acquisitions.
“Many of the sellers have basically doubled their investments,” Mr Tuaima said.
Daniel Abraham, associate director at estate agent Espace, said brokers at his company have been waiting for a slowdown. But every time it feels like there is a drop in momentum, they see another sharp rise in sales figures, he said. “It has [been] like this most probably for the last year.”
He said interest rates have given “another little bit of confidence” to buyers. “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. That’s most probably why we’ve seen it not completely slow down.”
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.
“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,” Mr Tuaima said.
Faisal Durrani, head of research for the Mena region at Knight Frank, said the current figures confirm 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.
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.