It is widely reported that Dubai’s property market is extremely active at the moment and doubt of ‘how long will it last’ will always go hand in hand with any growing market. Let’s take a look at the facts to see where the market is currently and what the future looks like, taking recent extracts from accredited financial reports.
The UBS 2022 report, listed the Dubai property market is ‘fair valued’ (FMV) meaning a low bubble risk.
‘A real estate bubble is caused by a variety of factors including rising economic prosperity (a country’s economic growth, security, and competitiveness), low-interest rates, wider mortgage product offers, and easy access to credit. Forces that make a housing bubble ‘pop’ include a downturn in the economy, a rise in interest rates, and a drop in demand.’
S&P Global 2023 Outlook:
GDP growth of 2.2% with a shallow recession in the U.S. in the first half of 2023, Close to 5% growth in China and no growth in Europe.
3% GDP growth in 2023. Dubai plans to double GDP in 10 years.
Inflation high of 5.7% in the eurozone and 4.3% in the U.S.
Average inflation of 3% in 2023 (less pressure on consumer spending)
Population growth of just below 1%
Population growth of 3-4% (supported by government initiatives and attractiveness as a place to live and do business, despite the introduction of corporate tax.
Geopolitical risks – uncertainty around the consequences of tensions, including energy and raw materials.
Boost to consumer sentiment, spending, and real estate transactions, higher oil prices.
Depreciation of emerging market currencies versus the U.S. Dollar
Dirham peg to the U.S dollar, provides currency stability and an attractive hedging option for buyers and investors from emerging markets
On the 6th June 2023, Khaleej Times reported that the World Bank had revised the UAE’s growth forecast for the next year upwards by 1.1% to 3.4% on higher oil output, reform initiatives and fresh investments.
The UAE is expected to see sustained growth of 3.4% over the next two years and will be the fastest growing economy during 2024 and 2025.
In May 2023, Knight Frank, reported in The National News, that prime values are rising due to the city’s safe-haven status and strong demand from ultra-high-net-worth individuals. It also stated that the luxury residential market is projected to record the highest growth rate for any prime market globally, at 13.5% in 2023, driven by a demand-supply imbalance and positive economic growth.
Referencing the 2022 report by UBS it stated that Dubai is a fair-valued market, more info can be found on my previous blog https://theagentdubai.com/2022/10/16/ubs-report-2022/
In light of the above, it is important to look at the buyers’ behaviours.
We are experiencing first time buyers in the region from a wider variety of countries than before. With the security, returns on equity and, almost, tax free lifestyle the Emirate gives it is now giving more confidence to a wider geographical investment.
Not only are people buying properties to take gain residency visas, but we are seeing allot more end users purchasing homes as they are setting up their businesses in Dubai. Notable booming industries include Artificial Intelligence AI, Fintech, Healthcare and Hospitality.
Although a healthy market can be seen as a Seller’s Market, we have so many elements which is still allowing Buyers to benefit in both off plan (Primary) and re sale (Secondary) markets.
As mentioned previously, since the Pandemic we have seen more people, who were renters lay routes in the Emirate by purchasing homes either off plan or completed. We are also experiencing a ‘renovation’ demand due to the more varied purchasers, which was never in the market prior with Jumeirah Islands, The Palm Villas, and Emirates Living being the main areas in demand.
Off Plan to Completion: Resale to Resale:
I previously blogged about ‘Initial Purchaser to Completion’ increases back in January of this year, https://theagentdubai.com/2023/01/22/profit-from-off-plan-initial-purchaser/ and with the new developments hitting that ‘6 month’ to handover premium sale price, I wanted to show the numbers of Resale to Resale, as most reports show return on investment in rental values rather than ROE, return of equity.
Resale Returns – these figures show the growth from the 2nd and 3rd purchaser from initial (direct with Developer)
Note the NET profit % includes the sellers original 4% plus a circa of 1% in additional charges
Collective Tower 2, Dubai Hills Estate – 1 Bedroom Apartment – 484 sq ft – Cash Sale
2nd purchaser brought from initial purchaser in August 2022 for AED855,000, the 3rd purchaser paid AED1,050,000 in April 2023, in 8 months the 2nd purchaser made a AED195,000 profit on his property, 18.6% gross increase, 13.6%
Sidra Villas I – Dubai Hill Estate – 4 Bedrooms – 3,456 sq ft BUA – Cash Sale
3rd Purchaser brought in October 2022 for AED5,321,500 and resold to the 4th purchaser in June 2023 for AED6,750,000, a profit of AED1,428,500 in 8 months, 21% gross increase. 16% net profit.
Beach Vista Tower 2, Beachfront, 1 Bedroom – 712 sq ft – Cash Sale
2nd purchaser brought in February 2022 for AED1,800,000 and sold for AED3,100,000 to the 3rd purchaser in July 2023, profit of AED1,300,000 in 17 months, a 42% increase, 37% net but excludes the profit made from leasing the property for short term holiday during this period.
Noura, Al Habtoor Residences, Business Bay – 2 bedroom apartment – 1,511 sq ft – Cash Sale
2nd purchaser brought in February 2022 for AED1,661,792 and sold for AED2,400,000 to the 3rd purchaser in June 2023, a AED738,208 profit, 31% profit gross, 26% net – during the period between the 2nd buyer earned AED145,000 in rental income in addition to the equity.
Data from mentioned sources in addition propertymonitor collated by Laura Adams.