Slow and steady wins the race

As per a recent study by Betterhomes, residential prices in Dubai will increase at a slower pace in 2023 by approximately 5% following a record-breaking year, after posting 11% growth in 2022 and 21% in 2021. ValuStrat published similar predictions regarding price stabilizations in the coming months and forecasts that prices will range between 7% – 10% with prime units to lead market activity.

Despite a slight slowdown in price appreciation, the rise in interest rates has made it difficult for many potential buyers to secure financing and has compelled them to remain renters rather than homeowners. However, it is worth noting that the Dubai real estate market has been relatively insulated from the impact of these rate fluctuations, thanks in large part to the prevalence of cash transactions, which account for a staggering 70% of all real estate deals. This has led to a steady influx of well-heeled buyers able to purchase properties outright, with the prime residential market reaping the greatest benefits. In fact, transactions in this segment alone totaled an impressive AED 30Bn in the fourth quarter of 2022.

According to Luxhabitat Sotheby’s, the average price of properties in prime areas increased by 8.72% QoQ, and the number of units sold increased by 230.24% QoQ at the end of 2022. The majority of buyers were high-net-worth individuals from Russia, followed by the United Kingdom, India, Italy, and France, whose significant investments have been driving property price growth.

Did you know? In order to sustain the sector’s noteworthy performance in the coming period, the Dubai Land Department recently published its “Strategic Plan 2026”. Already under implementation, the strategy aims to position the emirate’s real estate market as a global leader by providing seamless real estate services, implementing regulations, allocating human capital, and raising the real estate sector’s share of GDP. And to achieve these goals, it was built on five core pillars:

1. Pioneering real estate model – to improve sustainability in the sector
2. Incubator of real estate innovation – to leverage technology to solve key issues
3. Data-driven sector – to create trust and transparency by providing publicly accessible data
4. Agile DLD – to build a well-integrated digital ecosystem for partnerships, operations, and governance
5. Exceptional Journeys 2.0 – to place humans at the center of planning and implementation 

The bottom line? Despite the challenges posed by rising interest rates, the market has remained strong which has led to a steady influx of high-net-worth buyers, particularly in the prime residential market. This has contributed, in turn, to an increase in the average price of properties in these areas while the number of units sold continued to rise sharply too.