A moment of calm after two hectic years for UAE real estate

Dubai Tourism

Dubai’s real estate market reported record growth in 2023, but analysts are predicting slower price rises and a steady supply next year.

“Demand is very, very strong and has driven up prices,” said Taimur Khan, head of Middle East research at consultancy CBRE. For 2024, he is predicting “a contraction in the total number of sales after two very good years” as well as price and rental growth “in the lower single digits”.

Dubai registered more than 112,000 residential transactions from January to November this year. That’s above the 2022 total of about 92,000 and the highest annual figure yet, according to Khan.

Completed properties drove the activity, while off-plan purchases dropped nearly 60 percent after a period of strong sales.

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Average residential prices in Dubai rose 19.1 percent year-on-year in October, CBRE said last month. Rents increased by 19.7 percent, a slowdown from the previous month’s pace. 

Nearly 36,000 rental contracts – primarily renewals – were recorded in the third quarter, almost 41 percent more than the previous year, CBRE said in October, citing the Dubai Land Department.

“Unless there is a significant increase in property construction and handovers, the shortage of available properties in the city is expected to persist for the foreseeable future,” Lewis Allsopp, chief executive of agency Allsopp & Allsopp, told AGBI. 

Supply is growing, but yearly completions tend to come below expectations and prime areas are already built out, industry experts said.

Close to 27,100 units were delivered from January to September, about half of them in Meydan One, Downtown Dubai and Business Bay. Another 34,600 were slated for delivery by year end, but CBRE expects the number to be far lower.

“We are seeing supply growth within the more up-and-coming, newly developed markets,” said Khan. “Developers are being relatively sensible with how they’re delivering supply.”

Affluent residents are increasingly eyeing green inland communities as much as waterfront ones, according to Faisal Durrani, partner and head of research for Mena at Knight Frank.

“This shift in buyer preferences is driving the emergence of new prime areas and, as a result, we expect to announce a change to our definition of ‘prime Dubai’ in the new year,” Durrani said.

Ajmal Saifi, founder and chief executive of Prestige One Developments, has also seen a change in buyer interest.

“It used to be mainly Downtown, Marina, the Palm area,” he said. “Now other areas like Sports City and JVC [Jumeirah Village Circle] are attracting investors.”

Elsewhere in the UAE, Abu Dhabi and Ras Al Khaimah’s real estate markets also grew in 2023 and further growth is expected in 2024, according to Nick Witty, chief executive of agency Chestertons Mena.

This is primarily down to strategic public investment in the Emirati capital and a tourism push in RAK. 

Knight Frank’s Durrani added a note of caution on price rises, however. If the conflict in Israel and Gaza widens, this could push up oil prices and inflation – forcing central banks to further tighten interest rates.

“This could filter through to the property market in the form of higher borrowing costs and impact those looking to refinance purchases.”