Supply shortage looms large in outlook for Dubai property

Alamy

• Prime rents up 12% in H1 2024
• Sale prices up 21% in same period
• Developers face ‘excess demand’

The Dubai residential real estate market remains one of the world’s best performers, but a shortage of supply is having an increasingly big impact on rents and sale prices.

This is the picture that emerges from three real estate consultancies’ reports on the emirate’s market in the first six months of 2024. 

Dubai had the biggest increase in prime residential rent among 30 major cities, according to research published by Savills this week. Rents grew by more than 12 percent in H1, ahead of Bangkok and Lisbon.

“Dubai and Lisbon have been perennial leaders for growth in their prime rental markets because of excess demand for high-quality rental properties, but Bangkok is a new entrant,” says Kelcie Sellers, associate director for world research at Savills.  

Interest in the Thai capital from tourists and expatriates has increased sharply since the end of the pandemic, according to Savills. Higher interest rates are also contributing to rising prices.

Those are dynamics familiar to Dubai as well.

“We’re seeing some of the finest brands and developers launching world-class projects in Dubai and the wider UAE to capitalise on the growing demand,” says Andrew Cummings, head of residential at Savills Middle East.

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“However, with existing supply running tight, prime rentals are not expected to cool off anytime soon.”

Dubai was also in the top five for fastest increase in prime property values, according to Savills. It had 2.9 percent growth in the first half of the year, compared to an average of 0.8 percent across the 30 cities.

Lisbon was the top performer with growth of 4.2 percent. 

According to a CBRE analysis published on Wednesday, Dubai’s residential sale prices were 21.3 percent higher in H1 2024 than in the same period last year.

This is an acceleration from the 20.1 percent growth recorded in June. The trend is being driven by villa prices, says CBRE.

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About 12,250 new residential units were completed in the first six months of the year. Nearly half were delivered in Meydan One, Al Furjan and Jumeirah Village Circle. 

More than 73,600 residential transactions were registered in Dubai from January to June. This is a record high and an annual increase of 27.6 percent, according to CBRE. 

“However, we are also seeing that supply constraints may now be starting to impact activity levels across a range of sectors.

"This is likely to continue to underpin price and rental growth into the second half of the year,” says Taimur Khan, head of research for Mena at CBRE.

As a result, he added, developers are increasingly bringing forward their plans "to ensure that the lack of available stock does not continue to hamper potential activity into the medium and long term”.

In a Q2 analysis published last week, ValuStrat reported that the number of deals for ready homes dropped for the second quarter in a row, while still up nearly 5 percent from the same time in 2023.

“The upward trend in valuations and rents across various segments shows that the market cycle is in its upswing stage, demonstrating resilience and growth,” says Haider Tuaima, ValuStrat’s head of real estate research, in the report. 

“However, the decline in transaction volumes calls for a closer examination of market dynamics as stakeholders navigate this evolving landscape.”