Nakheel’s islands plan set to ease ‘severe shortage’ of luxury homes

Nakheel

• State developer unveils masterplan for 17-sq-km Dubai Islands
• More than 80 resorts and hotels will be spread over five islands
• Property experts point to ‘voracious’ demand from super-rich buyers

Dubai state developer Nakheel has unveiled the masterplan for its 17-square-kilometre Dubai Islands development.

Real estate experts have predicted that the project, announced on Sunday, will help ease the “severe shortage of high-end luxury homes” but they do not see the announcement as a return to the boom-era days of lavish mega-projects.

Dubai Islands will be spread over five islands and will house over 80 resorts and hotels, 20 kilometres of beaches, plus parks, open spaces and golf courses.

• Dubai’s Nakheel plans to raise $4.6bn loan to refinance debt
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The news comes as the emirate’s real estate sector reports a surge in sales. In the second quarter of this year, Dubai Land Department recorded a total of 22,504 sales transactions worth AED59.15 billion ($16.11 billion).

This was a 61.56 percent increase in volume year-on-year, and the highest for a decade.

“There’s plenty of data out there to suggest that this has probably been one of the strongest periods we’ve seen in the last year,” Rahail Aslam, founder and CEO of Select Group, told AGBI this month.

“It’s been record-breaking for us. It’s probably been our most successful period in a very long time, maybe comparable with pre-2008 when the market was booming.”

Demand for villas and super-luxe homes

Real estate firm Savills said 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, placing the emirate at No 4 in a new list of the world’s best-performing markets.

Consultancy ValuStrat reported earlier this month that villa prices in many parts of Dubai had surpassed the previous peak of 2014, fuelled in large part by a “relentless” influx of capital from wealthy overseas investors.

Faisal Durrani, partner and head of Middle East Research at real estate consultancy firm Knight Frank, said the launch of the Dubai Islands masterplan was timely as the city has a supply issue, even though 80,000 units are due to be delivered by the end of 2025.

“There is a severe shortage of high-end luxury homes, as well as villas. In fact, just 20 percent of the planned supply is expected to be villas. And between 2023 and 2025, the city’s prime neighbourhoods – the Palm Jumeirah, Jumeirah Bay Island and Emirates Hills – are expected to see just eight new homes completed.”

He added that the Dubai market was experiencing “a voracious level of demand from international ultra-high-net-worth individuals who are targeting Dubai’s most expensive homes, which for the most part tend to be villas.” 

Durrani said prices in some in-demand locations, such as the Palm Jumeirah, had increased by 68 percent since the start of the pandemic, while the cost of villas in Mohammed Bin Rashid City and Dubai Hills Estate had risen by close to 50 percent.

A mature market, not a cash-in scheme

Despite the return to boom-time sales records, Taimur Khan, head of research for the Middle East and North Africa at real estate consultancy firm CBRE, pointed out that the Nakheel project, which was previously known as Deira Islands, is part of the Dubai 2040 Urban Master Plan – and therefore part of the long-term development of the emirate, rather than a bid to cash in on the high demand.

“Current market conditions are an added bonus,” Khan said. “I don’t think we will see the same extent of activity in terms of mega-projects as we have seen historically and certainly not in the same mould as before. 

“Much has been learned by both the public and private sectors over the course of the last three property cycles and I think any new mega-projects will keep these learnings in mind to ensure their objectives are met, in what is now a much more established and mature market.”