Dubai home sales hit eight-year high, boosting prices

Residential transactions in Dubai surged to the highest level since 2013 in the six months to June, as people sought out larger homes, boosting prices in a market that’s been hamstrung by excess supply for years.

Average home prices rose 2.8 per cent in the six months to June, according to real estate adviser CBRE Group. “Given the strength of demand underpinning the market, we have seen price performance improve considerably,” said Taimur Khan, head of research at CBRE. Still, the increase is from a low base as it compares with prices in June 2020, when the world was grappling with lockdowns.

Transaction volumes soared in the first half, surging 69.2 per cent and 46.4 per cent compared to the same periods in 2020 and 2019 respectively, CBRE said. The top end of Dubai’s housing market, mostly single family homes known as villas, saw a resurgence of demand and led the increase in average prices.

The luxury end of the market has come alive in a city that became a haven for wealthy Europeans escaping lockdowns and for others drawn by the ease of getting vaccinated from Covid-19. The Middle East’s business and tourism hub provided an additional lure after a property downturn that started nearly seven years ago shaved more than a third off values.

Housing is also riding an extended boom around the world, with valuations soaring at the fastest pace since 2006, according to Knight Frank, and annual price increases in double digits. Earlier this year, HSBC Holdings said a growing demand for larger homes during the pandemic would further boost Dubai’s property market, echoing analysts at Morgan Stanley who expect the rally to last for “several years.”

In Dubai, chronic oversupply has somewhat kept price increases in check, but this year witnessed the lowest number of new home launches since 2012. So far this year, 18,616 units have been completed and an additional 37,466 are scheduled to be delivered over the course of 2021 – a lower rate than the 83,000 initially forecast, CBRE said.

“Citywide, price increases aren’t expected and affordability remains an issue,” CBRE’s Khan said by phone. “Due to oversupply, prices across the city will level up but we’ll have to wait sometime for prices to climb all over (Dubai).”

Home rents are continuing to fall, declining 5.9 per cent in the year to June 2021, and illustrating the challenge facing the overall market. Apartments have been the biggest drag, with rents dropping 8.1 per cent on average amid persisting oversupply. Over the same 12-month period, villa rents increased by 10.1 per cent.