Real estate in Dubai saw a bumper year in 2022 with record-breaking transactions and soaring property prices – and the trend is expected to continue in 2023, according to a new report, spelling good news for landlords but more rental woes for tenants.
Prices and transactions soared amid a strong economic recovery from the COVID-19 pandemic and the introduction of long-stay visas, property agents Allsopp and Allsopp said in their latest report.
This led to a record-breaking $72.2 billion (Dh265 billion) in real estate sales in 2022 – an all-time high and a 61 percent year-on-year increase in transactions. The sales value of transactions increased by a staggering 77 percent year-on-year.
The average villa or townhouse was sold for $1.36 million (Dh5 million) – an increase of 28 percent – while the average rental price for a villa or townhouse averaged at $80,000 a year (Dh297,000).
British buyers accounted for the highest proportion of retail transactions in 2022, followed by Indian, buyers from France, and Russians, the report said.
The areas which recorded the highest sales transactions for villas and townhouses in 2022 were Dubai South, Damac Hills, and Villanova, while the top three areas for apartment sales were Business Bay, Jumeriah Village Circle and Downtown Dubai.
Lewis Allsopp, CEO of Allsopp and Allsopp, said, far from letting up, the upward pricing trend will continue in 2023, especially given a lack of new units on the market.
“Dubai's real estate sector remains woefully undersupplied - 2022 saw 45k new homes come to market,” he said. “This level fell below the current market demand across crucial locations and needs help to keep up with the natural Dubai population increase welcomed during the same period.”
“Supply chain delays caused many new developments launched post-COVID to hand over slower than forecast, with many units expected to arrive in Q4 2024, further increasing sales prices for an already heated secondary property market.”
“This trend shows no sign of easing as we head into 2023, and I predict we will continue to see property prices in key locations climb throughout 2023.”
While this spells good news for landlords, it may mean a more of a financial headache for those who have already faced steep rental hikes.
Al Arabiya English reported in December how soaring property prices across the emirate forced cash-strapped residents to pack their bags and downsize as inflated rents continued to outstrip salary increases. For many, it meant moving out of their homes to smaller villas or apartments or finding a property in cheaper, further-to-reach areas.
As Allsopp explained: “You can’t talk about the 2022 Dubai real estate market without discussing the rental trends and how rents quickly accelerated throughout the year. The 2022 rental volumes largely eclipsed 2021 numbers from Jan-Sept, with the only months not outperforming 2021 being Q4 2022.”
“We can attribute this to Dubai Expo 2020 launching in Q4 2021 to spectacular fanfare and international attention, which resulted in record rental activity levels during the same period, something not even 2022 could top.”
“We saw tenants relocating to more affordable rental locations in the face of significant year-on-year rental price increases. 2022 shows signs of a returning migration back into the city, specifically into apartments, as prices across popular villa/townhouse communities continue to grow. Apartments remain the most popular rental choice for Dubai residents, accounting for 83.5 percent of the total rental contracts, with villas/townhouses making up 8.4 percent of all rentals in 2022.”
But rising prices have not been a worry for those with cash to spare.
Allsopp said 2022 also saw the rise of the ultra-high-net-worth individual (UHNWI). These investors and owners demand super premium properties in ultra-exclusive locations around the city, where land is limited, and secondary resale is in short supply.
“This fast-growing cash buyer segment continues to see value in prime Dubai real estate and will continue to drive prices upwards at the very top end of the market as demand far outstrips available supply.”
Interest will only continue as Dubai continues to be an attractive place to buy for both local and overseas investors, said Allsopp.
“One question that people have asked me (a lot) this (past) year remains, 'What makes Dubai such an attractive place for real estate investors?',” he said. “Today, Dubai has to be recognized as a leading world-class residential destination. It offers a fantastic lifestyle, personal safety, city-wide security, and state-of-the-art public infrastructure. Moreover, the city actively fosters an entrepreneurial spirit amongst its residents, investors, and stakeholders and strives to push forward like no other city I know.”
“Significant legislation changes in recent years continue to attract expats and investors worldwide to work, set up businesses, and raise their families in the city.”
“A recent relaxation of the UAE's residency visa rules in October has made it easier for expats to establish deeper roots in the country. Since introducing the golden visa scheme in 2019, Dubai has issued more than 150,000 golden visas. In addition, the introduction of retirement visas has positively impacted those considering Dubai a genuine long-term home.”
“No wonder the city's population leapt 2.1 percent in 2022, and now stands at 3.55 million residents - well on track for the ambitious 2040 target of 5.8 million residents.”
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