Why Housing Prices in Dubai Will Continue to Rise in 2024
The rise in property prices in Dubai will continue next year, but the pace of growth will be slower compared to 2023. The growth rate is expected to increase up to 10% amid high demand from residents, investors, and affluent individuals.
The influx of foreign funds contributes to the rise in property prices in Dubai, along with the transition of renters to owners and the availability of ready-to-move-in properties, among other factors.
Elite areas such as Jumeirah, Downtown, Palm Jumeirah will continue to stimulate the market, led by other elite areas that have witnessed unprecedented demand in the post-pandemic period. It is expected that in coastal areas such as Palm Jumeirah and Jumeirah Bay, as well as in major areas including Downtown Dubai, relatively higher price growth will continue next year.
The rise in property prices has been spurred by the introduction of long-term residence programs such as the "Golden Visa," "Retirement Visa," and "Freelancer Visa."
The head of research at consulting firm Cushman & Wakefield Core said, "With sustained demand and positive market sentiments, we predict that prices will continue to grow steadily in the range of 5–10% during 2024, although the pace is expected to slow down compared to the growth of 20–25% observed in 2023."
Since the second quarter of 2021, according to Moody's Investors Service, property prices in Dubai and Abu Dhabi have risen by about 15%. UAE real estate market conditions will remain unchanged for the next 12-18 months, but demand will be slightly slower than in previous years.
Lower prices are expected in developing areas such as Dubailand and Mohammed Bin Rashid City.
"Ongoing government efforts to make the city attractive to investors, tourists, and residents are expected to contribute to positive market sentiments, job creation, and, in turn, population growth across all income segments," say the experts.
"We expect global wealth to continue to gravitate towards Dubai due to its favorable socio-economic position and developers launching products to meet this demand, leading to costly transactions. We also predict that overall transaction volumes will remain stable due to strong demand from owners and investors," they add.
Over the last decade, the UAE real estate market has had two distinct types of buyers. The first is UAE residents, for whom property affordability has decreased due to rising property prices combined with higher inflation and interest rates. The second is wealthy buyers or millionaires, who support demand at the construction stage, some of whom are based in the UAE.
"Most of them are cash buyers, who are less sensitive to inflationary pressure and rising interest rates compared to mortgage buyers. The share of cash buyers has significantly increased over the last two years, aided by the UAE's reputation as a safe haven," the report states.
According to Moody’s, nearly 60% of Sobha Realty's total sales volume in 2022 was accounted for by non-UAE residents, the majority of whom purchased properties with their own funds. On the other hand, buyers from the UAE make up the majority of Aldar's real estate sales in Abu Dhabi and more than half of Emaar Properties' sales in Dubai.
Developers in the UAE continue to launch new projects. It should be noted that demand is higher than pre-pandemic. According to real estate companies Reidin and JLL, about 80,000 apartments are under construction in Dubai and Abu Dhabi in 2023.
Rating agency Moody's expects the profitability of housing construction companies to also improve in the coming year.
Moody’s stated, “Over the last 18 months, a number of developers have launched new projects, and since then, sales of properties under construction have significantly increased. This has led to a significant increase in deferred revenues across the board for developers.” The launch of new projects combined with rising demand has led to an increase in gross profit across the board.
Developers from the UAE are currently in a good position to benefit from growth opportunities in their domestic market. These companies continue to launch new projects and collect a large portion of cash flow prior to their completion," Moody’s analysts stated.