Here’s why Dubai prime properties will continue to see high returns in 2024: Savills

Dubai retained its leadership in the world of luxury real estate, boasting a whopping 17.4 per cent increase in capital values in 2023. While the second half saw more moderate growth of 5.6 per cent, it still significantly outpaced the global average of 2.2 per cent, according to the Savills Prime Residential World Cities Index.

According to Savills’ researchers, the market is still relatively competitively priced by global standards, at $850 per square foot.

Competitive pricing complemented by a low cost of living, simple and seamless visa procedures, and a warm climate are key factors that make the emirate appealing to international and domestic investors and buyers.

Read: In numbers: Dubai real estate registers best-ever performance in 2023

Also read: 7 reasons why investors can’t resist Dubai’s real estate sector

How other international cities are faring

According to the report, in H2 2023, some cities experienced global economic turbulence more than others.

Asia Pacific cities led capital value growth in 2023, with Mumbai leading the way. Hong Kong’s capital values took a beating, falling 3.7 per cent over the year due to ongoing political and economic challenges.

New York and San Francisco recorded some declines in 2023. Factors such as people returning to the office and tech turbulence did impact the housing market.

“In the face of ongoing economic uncertainty and a higher interest rate environment, prime residential markets in world cities were muted in 2023 following two years of significant gains. Growth is forecast to slow further in 2024 as markets return to more normal conditions, but will broadly remain in positive territory,” said Kelcie Sellers, associate, Savills World Research.

Prime residential price growth of a modest 0.6 per cent is predicted across the 30 global cities monitored. This reflects a drop from the 2.2 per cent achieved in 2023.

Prime properties: Who will be the top performer?

Sydney and Dubai are both tied for the top position in 2024, benefitting from increases in their high-net-worth populations.

Sydney is experiencing rising demand for quality prime homes, but supply remains low. This imbalance could continue through the year, hiking up prices, which are forecast to increase by 8-9.9 per cent.

Dubai rose by a significant 17.4 per cent over 2023 as mentioned above, but growth could slow in 2024. Savills though expects prices to grow in the emirate by a further 4-5.9 per cent.

Suffering from weaker sentiment associated with higher interest rates and the challenging economic backdrop, the prime residential markets of Los Angeles, New York, San Francisco, Seoul, London, Singapore, and Hong Kong are all forecast to see price falls this year.

Sellers says, “We expect it to be a year to watch the markets globally. Countries that account for approximately 40 per cent of the global population will go to the polls this year, and housing will likely be front of mind for many voters and policymakers alike. The potential for central banks to also cut interest rate during mid to late 2024 may also boost activity across prime property markets and could surprise on the upside for pricing in the latter part of the year.”

Who leads in rental performance and yield?

• Dubai also recorded rental price increases during the year at a little under 10 per cent, versus the average 5.1 per cent recorded among other global cities in the Savills index.
• Lisbon led prime rental growth among the 30 cities in the index, increasing 39 per cent last year.
• In terms of yields, Dubai stands out as a high-yielding city by world city standards, with returns of 4.8 per cent.
• Across all world cities, prime gross yields stood at 3.1 per cent as global rental markets recorded stronger growth than the sales markets.
• The cost of buying, holding, and selling a property in Dubai is also among the lowest, at less than 10 per cent of the property purchase price, versus 15 per cent, on average, across the 30 global cities.