Dubai Property Market Forecasts for 2023 and Results for 2022

The year 2022 was a record-breaking year for the real estate market in several areas of Dubai. In accordance with the Property Finder Zeitgeist 2022 Report, over 88,000 sales transactions were registered in the emirate of Dubai within the period from January to November 2022. These numbers are 46% higher in comparison to the year before and 38% higher than in 2013, when there was a peak in the real estate market. The total market volume exceeded AED 240,000,000,000 (USD 65,350,000,000), which is 61% more in comparison to the previous year of 2021. This intensive development can be explained by the growth in the total value of off-plan real estate transactions, which increased by 86% in comparison to 2021. The share of properties which are under construction constitutes 44% of the total number of transactions, while the amount of the corresponding transactions reached AED 83,000,000,000 (USD 22,597,000,000), which is equal to 35% of the total value of transactions. In 2021 these numbers constituted 40% and 30% respectively.

In 2022, the real estate market of Dubai saw a high demand for properties and a growing influx of foreign investment. Among the key reasons which attracted investors from other countries to invest in the Dubai property market were the economic stability, which has become especially important in the modern geopolitical and economic situation, as well as an effective investment and visa policy.

According to Bayut’s Dubai annual sales market report, the value of real estate in Dubai has increased significantly in 2022, both in the luxury and affordable sectors. In the affordable property sector, the average price per sq. ft increased by 11% over the year, while the premium sector saw a growth of 24%.

A record-breaking demand for properties in Dubai in the previous year led to an increase in rental prices. In mid-2022, CBRE experts mentioned a 19% increase in rental prices.

According to the report by Bayut, at the end of 2022, the price of renting a property in the budget sector increased by 23.4%. In the ultra-luxury segment, this growth reached 54%, and a particularly noticeable price jump was seen in areas with a limited number of available real estate units including Jumeirah, Dubai Hills Estate and Palm Jumeirah.

Jumeirah Village Circle (JVC) was the most sought-after area among tenants wishing to rent affordable apartments. The average annual rental cost for a 1-bedroom apartment here increased by 15% in comparison to 2021 and reached AED 51,000 (USD 13,900). The price of renting a studio increased by 23% to AED 36,000 (USD 9,800). Areas such as Bur Dubai, Dubai Silicon Oasis, Deira and Al Nahda are also quite popular among people looking for affordable apartments.

На рынке аренды доступных по цене вилл наибольшей популярностью пользовались дома в DAMAC Hills 2. Средняя стоимость аренды виллы с тремя спальнями здесь составила AED 63,000 (USD 17,200), увеличившись на 8 %. Также в число самых популярных районов в этом секторе вошли Mirdif, Dubailand, Reem и Jumeirah Village Circle.

Арендаторы роскошных вилл в 2022 году отдавали наибольшее предпочтение району Al Barsha. Средняя стоимость годовой аренды виллы с четырьмя спальнями здесь выросла почти на 27 % — до AED 220,000 (USD 59,900). Другими популярными районами для аренды жилья класса люкс стали Jumeirah, где рост арендной платы за виллы с четырьмя спальнями составил 53 %, и Dubai Hills Estate Umm Suqeim, Arabian Ranches 2.

Experts have stated that the Dubai real estate market in 2023 will grow no less intensively than in the record-breaking previous year. Furthermore, the emerging global recession in the real estate sector won’t have a negative impact on it.

Thus, according to a Reuters analysis, in 2023, property prices in the USA will fall by 12%, while in the UK, in accordance with a Bloomberg forecast, costs may fall by 30% by 2024. Experts explain the recession of world markets, among other factors, including inflation and rising interest rates, which increased from almost 0% to over 4% by the end of 2022, will affect the affordability of properties for potential purchasers.

The emirate of Dubai will be able to counter this global downward trend in real estate costs for the following reasons; first of all, a huge majority of investors pay for properties in the emirate in cash, which means that the increase in interest rates won’t have a big impact on the market. In the USA and the UK only 22% and 31% of purchases are paid in cash, while in Dubai the share of cash transactions is 70%.

Secondly, unlike European countries, the economy of the UAE gets benefits from the rise of oil costs, which plays a great role in global inflation. Thirdly, since the start of the pandemic, the country has offered effective measures that have positioned the UAE as a safe place for living, doing business and making investments. The emirate provides expats and foreign investors with various types of residence visas. Moreover, it boasts high-end educational institutions, developed healthcare facilities, world-class attractions and entertainment activities, a convenient business climate, low tax rates and many other advantages.

A new wave of migration to Dubai that will lead to high demand for property in 2023 and beyond is being seen now. In 2022, the population of Dubai exceeded 3,500,000 people, and experts believe that this will grow to 5,900,000 by 2040. Such a tendency will lead to increase in demand for properties for sale and to rent.

As for the possibility of cost changes, in the UBS Bubble Index 2022 which considers the risks of a bubble in property markets, it mentioned that the Dubai real estate sector is one of the most unheated around the globe. Even though prices in the emirate have been growing for the last two years after seven years of decline, they continue being quite attractive with an average rental return of 6.5%.

According to a Knight Frank study, property prices in Dubai will rise by 13.5% in 2023. This kind of growth will be the highest among the 25 metropolitans around the world that were included in the analysis. In addition, Dubai is the leader by a wide margin, according to the study, as Miami, which took 2nd place, as well as Dublin, Lisbon, Los Angeles, Madrid and Paris, which are all 3rd from the top, prices will increase by 5% and 4% respectively. At the same time, ultra-luxury residential units will be in higher demand, according to experts.

Among the prospective areas are Emaar Beachfront, which is a new gated community that boasts a favourable location on the coast of the Arabian Gulf between Palm Jumeirah and Mina Seyahi. The community from Emaar Properties will include 27 residential skyscrapers and residents will be provided with access to a 1.5 km long private beach, as well as a 1,400 berth marina, dining options, various social infrastructure objects and plenty of entertainment activities. The potential ROI here is about 8%.