Dubai: Meeting the demand for luxury real estate

Dubai’s luxury property market has bucked the trend in much of the world, where values have largely dropped amid high interest rates and a challenging economic outlook

Dubai’s property market entered 2023 on a positive note after the city closed the previous year with a record 90,881 residential transactions, beating the previous record of 81,182 deals achieved in 2009.

The city’s residential market recorded its strongest start to the year in terms of transaction volumes, with 9,229 residential transactions in January 2023, up 69.2 per cent from a year earlier, according to property consultancy firm CBRE’s Residential Real Estate Market Snapshot report.

The property market’s luxury segment continues to be a global outlier, with prices projected to end 2023 around 50 per cent higher than in 2021.

“As an established subsector, the luxury real estate market is less than three years old in the region. Dubai is already seeing multiple transactions upwards of Dhs100m every quarter and we expect an increase in this category of transactions in the coming years,” says George Azar, chairman and CEO, LUXHABITAT Sotheby’s International Realty.

Dubai’s luxury property sector has been resilient to a slowing global economy, geopolitical tensions and interest rate hikes – challenges that are threatening other markets, including London and Seoul.

Read: Driven Properties offers an insight into trends in Dubai’s luxury real estate market

Real estate services firm Savills projected that 17 major global cities in its Prime Residential World Cities Index will record slower capital value growth this year, while the other 13 cities, including Dubai, are set to register equal or even slightly enhanced growth.

“The regional hubs of Dubai and Singapore are forecast to top the global price growth charts in 2023. Both cities will continue to see sustained inflows of high-net-worth individuals (HNWIs),” Swapnil Pillai, associate director of Middle East Research at Savills says while cautioning that the cities are not immune to high interest rates and global economic headwinds.

Factors pushing growth

Dubai has definitely been seeing a growing influx of wealthy global investors, who are drawn by a flurry of reforms that are being implemented to make the emirate an appealing destination for global companies, investors and talent.

These include wealthy Russians and mega-rich Asians looking for second homes. Indian billionaire Mukesh Ambani bought a mansion worth $80m mansion in Palm Jumeirah in March 2022. Later in October, the tycoon followed it up with the purchase of another mansion on the palm-shaped island for $163m.

Other big-name investors in Dubai’s prime residential market include UK-based billionaire Lakshmi Mittal and Chaopeng Zhang, the CEO and founder of Binance, who praised the city for its very “progressive and good business environment”.

The list also includes Israeli investors following the signing of the Abraham Accords, as well as crypto millionaires and hedge fund executives.

The confluence of socioeconomic challenges in Southeast Asia is also driving growth in the market as investors from the region, especially mainland China, are pouring millions of dollars into the city’s property sector.

“Based on January’s data, we are likely to see investments from China edge by over 100 per cent year-on-year and the overall market registering growth in transactions value as well as prices in 2023,” Abdullah Alajaji, the CEO and founder of Driven Properties told Gulf Business in an earlier interview.

Europeans, Americans and Canadian investors are also not far behind, and have been snapping up properties along the city’s beachfront.

Read: Why Dubai’s luxury real estate market is a haven for investors

So what are they buying

Last year, the luxury segment saw an increase in the number of units sold in prime areas, including Palm Jumeirah, Jumeirah Bay and Al Barari, jumping as much as 30 per cent quarter-on-quarter (QoQ) with 9,836 units sold throughout the year.

The latest data from the Dubai Land Department shared by LUXHABITAT Sotheby’s International Realty shows that the city registered an 8.72 per cent QoQ increase in prime residential market transactions in 2022 with the average price of a property at Dhs6.9m.

The volume of sales in the prime villa market surged by more than 14 per cent with Emirates Living registering the highest number of units sold at 77 villas while Palm Jumeirah recorded the highest sales volume at Dhs2.56bn.

“Reflecting a total increase in volume of 39.62 per cent QoQ and driven largely by prime property sales in Palm Jumeirah (Dhs11bn), Business Bay (Dhs4bn) and MBR City (Dh3.7bn), growing demand drove average prime property prices up by 8.72 per cent in comparison to the last quarter of 2022,” adds Azar.

The start of this year has seen the segment show great promise, with new luxury property sales records being registered on a monthly if not weekly basis. A three-bedroom apartment in the super luxe Bulgari Resort and Residences on Jumeirah Bay Island was sold by Driven Properties earlier in February for a whopping price of Dhs13,543 per square foot. The apartment sold for Dhs42.9m.

The real estate agency’s record-breaking prime residential property sales include a five-bedroom, 4,558-square-foot townhouse, which was sold for about Dhs36m in Jumeirah Bay Island’s coastal Villa Amalfi development.

“Adding to the city’s appeal is its relative ‘affordability’, with prime homes transacting for around $800 per square foot, making Dubai one of the most ‘affordable’ luxury residential markets in the world,” says Faisal Durrani, head of Middle East Research at Knight Frank.

The strong performance of the Dubai property market, a sector that had been sluggish since 2014, has ignited hopes that projects that were stalled due to financial constraints can now be completed.

Healthy supply is key

Azar highlights that in light of the growing demand for Dubai’s luxury residential properties, the focus in 2023 will be to ensure a healthy supply to avoid drastic price escalation.

The authorities introduced measures to prevent volatility, including incentives for property investment funds to enhance the city’s appeal as a global real estate investment destination and attract global property investment funds to the emirate.

Abu Dhabi’s Aldar Properties formed a joint venture with Dubai Holding in February to develop luxury projects across three prime areas in the city. Sharjah’s Arada Developments also forayed into Dubai’s prime property market last year with a $65.4m (Dhs240m) investment in Palm Jumeirah.

Dubai remains a lucrative luxury property market, where proactive government policy has bolstered the city’s safe-haven status fuelling long-term demand from buyers and investors alike.