Dubai Real Estate 2023
Over the last two decades, Dubai’s property market has consistently delivered some of the highest real estate returns globally, with annual capital appreciation exceeding 100% for early overseas investors. However, the market has also experienced significant lows, resulting in portfolio losses for investors who entered at the wrong time. As we move beyond 2023, there is increasing investor confidence that the Dubai property market has matured, and investment returns are sustainable over the mid and long term.
Dubai’s real estate market had an outstanding performance in 2022, outperforming all other global real estate markets and forecasted to continue to deliver high returns in 2023. The post-COVID economy is strong, and the market is mostly insulated from interest rate hikes. Occupancy rates are on the rise, and rents are soaring, supported by new visa rules that promote net migration and investment.
In 2022, investor demand led to an unprecedented surge in real estate transactions, with a 65% increase compared to the previous year, resulting in USD 72 billion worth of sales, a historical high. Investors also enjoyed an 11% average increase in the value of their Dubai properties, impressive considering the stagnation or losses recorded by other prime real estate markets worldwide.
Tenant demand for apartments surged, accounting for 84% of total rental contracts, while occupancy rates increased from 60% to 70%, and rents rose by over 20%. Dubai property also attracted investors from all over the world, with Brits, Russians, Indians, and Italians representing the largest volumes of foreign transactions.
Villas became highly sought after by high-net-worth individuals during the COVID pandemic, with a capital growth of 34% since January 2020. However, over the past two quarters, as the world adjusted to a more normal post-pandemic way of life, the apartment market also recovered, with a 70% surge in sales transaction volumes compared to less than 5% for villas.
Dubai property market review
• Average capital appreciation across Dubai in 2022: 11%
• Notable submarkets include
• The Palm – capital appreciation of 23%
• Downtown – capital appreciation of 12%
• Dubai Marina – capital appreciation of 25%
• Average occupancy: 72% – an increase from 60% in 2021
• Average rents increased by 21% over 2022
• Average rents across Dubai in 2022 are AED 77 per sq ft
• Supply growth +38,000 units in 2022
Dubai Property Market in 2023: A Positive Outlook
Investors are increasingly optimistic about the future of Dubai’s property market, which is expected to be more sustainable and mature than ever before.
While every investment carries risk, and most property markets experience cycles, Dubai has historically represented an extreme boom or bust scenario.
However, the current growth trend in Dubai’s real estate began in mid-2020 and has accelerated, resulting in the record levels of sales seen in 2022. Despite expectations that the market will eventually slow down, most forecasts predict that Dubai property will continue to deliver strong returns, particularly compared to other major property markets favoured by global real estate investors.
Forecasts for Dubai’s property market in 2023 are overwhelmingly positive, with prime properties expected to see around a 13% increase in value, and the mainstream market set for capital growth of approximately 5 to 7%.
Moreover, these forecasts not only present a compelling investment opportunity but also represent good value, particularly when compared to other global property markets. Despite property prices rising year-on-year for the past three years, overall prices in Dubai remain over 20% below their 2014 peak.
The supply and demand fundamentals of the market are now more stable than ever before, with less speculative buying and a market that is relatively insulated from global interest rate rises that have impacted other real estate markets. In fact, cash purchases are on the rise in Dubai and currently account for 80% of the total value of all transactions.
RECONSIDERING DUBAI PROPERTY INVESTMENT ON A LARGER SCALE
Investors are now taking a broader view of the Dubai property market due to its increasing maturity and sustainable supply and demand. Here are some key factors to consider:
Greater affordability
Despite attracting many ultra-high net worth individuals and offering a desirable lifestyle and tax benefits, Dubai remains one of the most affordable luxury property destinations in the world. In fact, it has become even more affordable, especially in the mainstream market.
According to recent analysis, most submarkets in Dubai have property price-to-income ratios below the global affordable threshold of 6. The most affordable submarkets include Dubai South, JLT, Mohammed bin Rashid City, and Business Bay.
This is good news for investors planning to purchase in 2023, especially for first-time investors in the market. As more residents of Dubai become aware of its higher salaries and enter the owner-occupier market, the number of buyers per property is likely to increase. This will aid current investors’ exit strategies and place further upward pressure on property values.
Exclusive neighbourhoods
However, there are still very exclusive neighbourhoods in Dubai. The Palm, Jumeirah, Emirates Hills, and Jumeirah Bay Island have the highest property price-to-income ratios, all exceeding 20.
Visas driving investment and tenant growth
Dubai is one of the world’s safest and most desirable places to live, and many investors purchase assets in the country with the hope of gaining residency in the emirate.
In recent years, this has become more widespread and easier through Dubai’s Golden Visa, a government-backed scheme that aligns real estate purchases with residency and offers a 10-year visa. The criteria have been streamlined, and visas are now issued with some off-plan or leveraged purchases, with additional benefits and flexibility added to the visa status. Over 150,000 Golden Visas have been issued since its introduction.
The digital nomad visa, aimed at attracting young tech workers to the emirate’s emerging tech sector, has also boosted net migration and demand for rental properties close to key employment hubs. Dubai’s population has increased by 2% over the past year to 3.55 million residents, and it is on track to reach its 2040 target of 5.8 million residents.
Economic strength
Dubai’s economy has diversified significantly in recent years and is now one of the fastest growing and most dynamic economies not only in the GCC region but also in the world. At the beginning of 2023, the World Bank raised the UAE’s growth forecast for 2022 and 2023 by 1.2% and 0.7%, respectively, to 5.9% and 4.1%. Diversification and growth from the non-oil sector are considered major drivers.
Dubai is also a top location for foreign direct investment, with the UK (36%), the US (20%), France (10%), Singapore (5%), and Switzerland (4%) as major investors.
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