Increased foreign fund inflows, the availability of ready-to-move-in residences, and tenants becoming property owners are some of the factors that fuel the boom.
The surge in real estate values in Dubai is expected to continue in 2023, but at a slower rate. Growth of up to 10% is anticipated, driven primarily by high-net-worth individuals, residents, and investors.
Analysts predict that the market will be driven mostly by the prime residential segment, which will include Jumeirah, Downtown, Palm Jumeirah, and other upscale neighborhoods that have had exceptionally high demand in the wake of the pandemic.
Several factors are driving the rally, such as an increase in foreign fund inflows, tenants moving into homeownership, an increase in the number of properties that are ready to move into, and the interest of investors looking to profit from long-term residency programs like the Golden Visa, Retirement Visa, and Freelance Visa.
Head of research and consulting at Cushman & Wakefield Core Prathyusha Gurrapu says, “We foresee prices to continue witnessing steady increases in the range of 5-10 per cent over 2024 – albeit with the pace expected to slow down compared to the 20-25 per cent price increases witnessed in 2023.” This prediction is based on sustained demand and positive market sentiment.
According to Gurrapu, established neighborhoods like Downtown Dubai and coastal areas like Palm Jumeirah and Jumeirah Bay will continue to have significantly larger price increases in the upcoming year.
Moody’s Investors Service reports that since the second quarter of 2021, property prices in Dubai and Abu Dhabi have risen by almost 15%. The UAE real estate market is expected to continue to be in good shape over the next 12 to 18 months, although demand will be slower than it has been in the previous two years.
Reduced costs
Prathyusha Gurrapu anticipates comparatively less price increases in emerging locations like Mohammed bin Rashid City and Dubailand, where significant handovers are anticipated.
It is anticipated that the government’s ongoing efforts to attract tourists, investors, and residents will support the upbeat outlook for the market, lead to job development, and ultimately spur population expansion across all income brackets.
We anticipate that Dubai will continue to draw wealthy people from around the world because of its advantageous socioeconomic position and the high-end products that developers are releasing to meet this demand. Because of the robust demand from investors and owner-occupants, we also anticipate steady overall transaction volumes,” she continued.
There are two different kinds of buyers in the property market, which has changed in the last ten years. First, there are people of the United Arab Emirates, for whom rising property prices, together with increased inflation and interest rates, have made living more expensive. The second category of investors consists of millionaires or high-net-worth buyers who continue to fuel off-plan demand; some of these investors are situated in the United Arab Emirates.
Compared to buyers who use mortgage financing, the majority of these are cash buyers, who are less susceptible to inflationary pressures and rising interest rates. Due in large part to the UAE’s standing as a safe haven, the percentage of cash buyers has grown over the past two years, the report stated.
For instance, Moody’s estimates that in 2022, non-UAE citizens accounted for approximately 60% of Sobha Realty’s total sales, with the majority of these buyers being cash. However, the majority of development sales for Aldar in Abu Dhabi and more than half for Emaar Properties in Dubai are made by customers residing in the United Arab Emirates.
fresh endeavors
Homebuilders in the UAE are still starting new projects, and demand is higher than it was prior to the pandemic. Around 80,000 units of new supply are being added on a steady basis.
are being built in Dubai and Abu Dhabi this year, as per real estate data providers Reidin and JLL.
The global rating company Moody’s anticipates that within the next 12 to 18 months, homebuilders’ margins would likewise rise.
“In the last 18 months, a lot of developers have started new projects, and since then, off-plan sales have increased dramatically. Developers’ revenue backlogs have significantly increased as a result, according to Moody’s, which also noted that new project launches and rising demand have increased gross margins worldwide.
Homebuilders in the United Arab Emirates are well-positioned to take advantage of the expansion prospects inside their own market. Leverage and the Ebit to interest expense ratios should continue to be robust overall, in our opinion. These businesses keep starting new projects and collecting the majority of cash flow before the projects are finished, according to Moody’s analysts.
