Dubai villa prices pass 2014 peak amid influx of overseas money

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• The rich favour emirate for property investments
• Prices up 36% in exclusive Arabian Ranches neighbourhood
• Apartments in Burj Khalifa tower up 17.8% and Palm Jumeirah 18.8%

Villa prices in many parts of Dubai have surpassed the previous peak of 2014, fuelled in large part by a “relentless” influx of capital from wealthy overseas investors.

Real estate consultants ValuStrat reported that although villa price rises are slowing, average values are now at levels last seen in early 2014.

Faisal Durrani, partner – head of Middle East research at Knight Frank, told AGBI that many of Dubai’s most expensive villa neighbourhoods, such as the Palm Jumeirah, have surpassed 2014 pricing “by some way”, with global ultra high net worth individuals favouring Dubai for real estate deals in the region.

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“Interestingly, rental growth for the most part has kept pace with price rises, meaning there has been almost no yield compression. Apartment yields are on average holding at about six percent, while villas are steady at four percent,” Durrani said.

According to the ValuStrat data, residential capital values are slowly heading towards a new market-cycle peak, with its ValuStrat Price Index (VPI) suggesting that apartments, which represent 85 percent of total transactions, could hit “price ceilings within the short term”. 

On an annual basis, average villa prices were 29.9 percent higher last month. Top performers were Arabian Ranches (36 percent), Jumeirah Islands (34.4 percent) and Jumeirah Village (30.6 percent).

By contrast, apartments in Dubai averaged an average 7.9 percent rise in annual capital gains, with Palm Jumeirah (18.8 percent), the Burj Khalifa tower (17.8 percent) and Jumeirah Beach Residence (13.8 percent) delivering the biggest jumps.

ValuStrat also said that Dubai’s volume of home sales fell 19.3 percent in July when compared to June, but was still 91.3 percent higher than the same period last year. July saw 25 transactions valued over AED30 million as the luxury submarket continued to shine.

Prathyusha Gurrapu, head of research and advisory at real estate consultancy Core, said: “We see city-wide Q2 villa sales prices up 20 percent year-on-year and still nine percent below 2014 peak values.

“City-wide apartment sales prices in Q2 were 10 percent above the same period last year while 26 percent below the 2014 peak values.

“However, when comparing to 2014 peak values, it is important to note that there were nearly 200,000 fewer units in the market and nearly 1.1 million fewer people than today. Dubai today is a much more mature market with robust socio-economic factors underlining the city’s growth.”

Knight Frank’s Durrani added: “Residential values in Dubai continue to climb, building on the turn around that began in late 2019 and early 2020. 

While overall apartment prices are still some 25-30 percent below the 2014 peak, villa prices are rapidly closing the gap on the last market high… with the most expensive villa neighbourhoods, such as Palm Jumeirah, already surpassing 2014 pricing.

The ValuStrat report comes just days after Savills named Dubai as the fourth best performing prime residential property market in the world in the first half of 2022.

US cities including Miami, Los Angeles, San Francisco and New York dominated the leaderboard, with Dubai the only non-US city to make the top five, according to data from Savills.

In Dubai prime prices grew by 4.7 percent during the first half of the year and the city is forecast to witness strong capital growth for the remainder of 2022. The growth rate was almost double the average of 2.4 percent seen across the cities covered by the Savills Index.

Helen Tatham, head of prime residential Dubai for Savills, said: “Dubai is set to perform the strongest for the remainder of 2022 and factors that work in its favour include the continuously positive changes to policies, the most recent being additional benefits for long-term visa holders, with the opportunity for residents to have a superior quality of life at their fingertips. 

“In addition to a surge in high net worth expatriates choosing Dubai as a new long- or part-time residential location, there is a growing trend of existing residents taking a long-term view on making Dubai their primary home.”