The micro and macro trends impacting Dubai’s real estate market

Dubai’s real estate market has become a topic of significant interest in 2022. The year behind us was memorable in various ways for the ways that the emirate’s real estate market performed, but what are the factors that will influence the sector this year?

Macro trends
The economic growth in Dubai has been phenomenal in many ways. Over the past few years, the government has embarked on several initiatives and reforms aimed mainly at attracting more foreign direct investment into the city.

The government introduced the 10-year visa (also known as the golden visa) with the purpose of offering long-term residence for individuals and retain talented people in the country. In addition, reforms surrounding the ownership of companies in the emirate without the requirement of a local sponsor helped spur economic growth.

Also, the UAE’s decisive action in embracing a more global workweek from Monday to Friday helped propel the emirate’s position, both from a trade and transport perspective, as well as its status as a financial hub and a tourism destination.

The UAE Central bank forecast 4.2 per cent GDP growth for 2022, double the growth rate achieved in 2021 of 2.1 per cent. With population growth expected to hit record highs as a result of a new affluent population making permanent moves to Dubai, this will further accelerate growth in all sectors of the economy.

Micro trends
The stellar performance of the Dubai real estate market in 2021 has caught the attention of property investor from across the globe. Buoyed by years of infrastructure and population growth, the market has outperformed most global property markets, beating Paris, London, New York and Hong Kong, to name a few. In fact, Dubai was ranked third globally as the city with the highest residential capital growth, recorded at 17 per cent, in 2021.

When it comes to transactions, the year 2021 has seen the highest value of transaction in the sector’s history, at Dhs300bn. This represents a growth of 72 per cent year-on-year.

In terms of capital values, it was demand/supply dynamics at work in 2021. The best performing sub-sectors were the ultra-high-end segment of the market and villas/townhouses, with both sub-sectors registering double digit growth year-on-year. With relatively low levels of supply, increased demand coming from affluent individuals relocating to Dubai, and residents trading up into larger Covid-friendly living space, both sectors witnessed robust growth during 2021.

Other sub-sectors that registered growth during the year include waterfront communities and branded/serviced residences in established locations.

Looking into 2022 and beyond, the Dubai real estate market looks set to continue its positive momentum driven by a continuous influx of new capital and a relatively cautious release of new supply by government and semi-government developers. With inflation upon us, and interest rate hikes on the horizon, real estate has been the right hedge for investors. In Dubai, the environment is ripe for further growth as new catalysts continue to emerge.

Abdullah Alajaji is the founder of Driven Properties