In 2021, the Dubai market broke a 12-year record. The reported numbers were noteworthy even in a market with all-time records of performance, which would have sparked the desire of overseas investors. For example, this sector draws the attention of those willing to purchase villas in Dubai, UAE. What events have taken place since the beginning of 2022 in the local real estate market and what is the relevant situation, AX Capital explained.
Dubai housing market in 2022 versus 2021
In 2021, real estate sales transactions reached AED 151.07 billion ($41.1 billion), an increase of 110% over the previous 12-month period. Transaction volume has also grown by 75% from 2020 to 2021. It was not just the soar of the market affected by the pandemic. In 2021, the results were also much higher in comparison with 2019. The growth in value and volume was 90% and 55%, respectively.
2022 continues the successful tendency of 2021. Not only in the last 12 years have investors witnessed one of the most luxurious neighborhoods ever recorded in the real estate market.
From January to March, investors acquired more than 20,000 units in Dubai. This is the largest number of transactions in the first quarter in history.
Investors mostly focused on apartments, the vast majority of these transactions. Additionally, there was growth at a healthy pace throughout the market. Villa sales also peaked at 58%. Buyers paid attention to ready-made and off-plan options Sales of units under construction were up nearly 100%, and sales of secondary housing grew by almost 75%.
According to a recent Property Monitor report, the cost of villas has increased by 20% over the past 12 months. The overall condo market is still growing strongly, at around 10%.
Districts with the highest price increases
Since the start of the growth cycle, the luxury real estate market in Dubai has experienced the highest increase in gains once again. Some investors have even seen asset values skyrocket by a staggering 60% in a single year. Almost everywhere, there has been a double-digit price surge in the premium real estate segment.
An inflow of demand from wealthy investors and buyers spurred actions in the domestic market with total values of over $10 million, which also saw a record number of transactions. There were 93 transactions involving these major assets in the previous year. The previous high was only 31 sales in 2015, which was seven years ago.
The latest information for the end of the first quarter of 2022 showed the key leaders district by district. The most sought-after and actively growing areas are the following:
- Palm Jumeirah. Villa prices rose by 5% in April alone:
- Al Barari. The cost of villas increased by 4.9%;
- Jumeirah and Jumeirah Golf Estates. Villa prices grew by 3.7% and 4.6%, respectively.
What to expect in the future: a price rise or a price drop?
This is only the third development cycle of the local housing market, so there is little historical evidence to compare. Of course, every cycle is unique, but there is a general belief that this time the market will be less volatile and the growth will be more sustainable.
A Reuters survey involving 13 real estate analysts noted very strong post-Expo 2020 and post-pandemic performance but was adamant that the market would slow down to more resilient levels, predicting average annual growth of 3% by 2024.
Rental property investment will also continue to grow. Analysts expect rental rates to continue rising in the short-to-medium term. The current rent growth is quite rapid in the city. Rents are growing at the fastest pace (16%) since October 2014.
The main driving forces of the market
For most of the past two decades, the UAE market has built properties in reserve. Nowadays, it looks like the way it works has been changed a bit to make it more sustainable and strategic.
The government has adopted a number of decisions and related initiatives. They have improved the ease and attractiveness of committing one’s long-term future to Dubai. Although getting residence permits for retirees and remote employees was part of those goals, the expanded 10-year visa program represented the most substantial change.
The Golden Visa program includes getting a long-term renewable visa for 10 years. Recent updates have simplified the eligibility criteria, providing visa holders with additional benefits and flexibility. The new visa regulations have allowed more people to obtain an equivalent residence permit when buying a home in Dubai, including off-plan and mortgage purchases.
Other macroeconomic and geopolitical factors also point to steady growth.
Of course, the UAE’s oil revenues will rise in line with the global increase in raw material prices. But Dubai’s economy is very diversified at the moment. Since the pandemic, the United Arab Emirates has become the most vaccinated country in the world, with over 95% of the population receiving at least 2 doses of the vaccine. The determined action has allowed the emirate to move forward with its economic recovery and allowed Expo 2020 to be held just a year late. This led to a change in GDP forecasts in the direction of an increase. This year, greater economic growth of 6.2% is recorded in the metropolis after a 5.2% rate in 2021.
Positive post-COVID sentiment, along with new visa rules, has also boosted employment. In 2022, the pace of new job creation has risen by 3.5%.
Finally, the market itself is showing signs of maturing. Although the main sub-market sets the inflow of ultra-high-net-worth individuals, the market is globally attractive at all levels as well. In addition, more prominent areas and residential communities are becoming desirable on their own. Investors face strong competition from end-users and existing residents.
Should we expect long-term price increases?
Every real estate market in the world will experience its own ups and downs, but there is hope that the days of boom and bust are over in Dubai. Both previous cycles lasted almost 10 years. Despite huge overall gains, both experienced long periods of stagnation within the cycle.
Investors have a little more than a year before the start of the third growth cycle, but the ceiling is already close. This means a breakthrough. Average property prices are still more than 25% lower compared to the last market high of 2014. This corresponds to prices per square meter, which are 26% lower for apartments and almost 11% lower for villas. In spite of the huge increase that happened in the last 12 months.
It is important to note that the majority of buyers, end-users, and investors are not particularly sensitive to historical prices and values. The comparison of Dubai’s prestigious beachfront houses to those in other biggest places and real estate markets is actually far more plausible. In fact, with these comparisons, Dubai’s prices are extremely affordable.
As a result of large transaction volumes, wealthy individuals wishing to buy a second house or move will acquire the majority of completed and second-hand homes in the future years, contributing to an increase in the average level. The rest of the market will be affected by this lack of inventory, which should drive interest in both the primary and off-plan sectors.
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