Staff Report,
Dubai UAE,
Dubai’s prime segment in the real estate market experienced a rise in capital value by 17.4 percent in 2023 against the average 2.2 percent growth, leading its global contenders. Standing at US$850 (Dh3,122) per square foot, the city retains its position as more affordable than the likes of Tokyo and Hong Kong, offering low cost of living, a relatively easy visa process, and a warmer climate, thereby continuing to attract international and domestic buyers.
Based on Savills Prime Residential World Cities Index, Dubai overtook Mumbai, Bangkok, Tokyo, and Sydney among the 30 cities covered in the report. Others like New York and San Francisco experienced global economic turbulence, leading to a drop in value by 3.7 percent and 6.1 percent, respectively, than the rest in the second half of 2023. Hong Kong’s on-going political and economic uncertainty continued to hamper its prime residential markets, with capital values falling 3.7 percent over the year.
Savills predicted capital values to remain positive in 2024. Kelcie Sellers, Associate, Savills World Research, said, “In the face of ongoing economic uncertainty and a higher interest rate environment, prime residential markets in world cities were muted in 2023 following two years of significant gains. Growth is forecast to slow further in 2024 as markets return to more normal conditions, but will broadly remain in positive territory.”
Sydney and Dubai are predicted to be the two top performers in 2024, with both cities set to benefit from increases in their high-net-worth populations. Sydney is seeing high levels of demand for quality prime homes, but supply remains low. It is likely that this imbalance will persist through 2024 and push up prices, which are forecasted to increase by 8 to 9.9 percent.
Dubai increased by a significant 17.4 percent over the year, but it’s likely that this rate of growth will slow this year as it returns to more normal activity. Savills anticipates prices to grow in the emirate by a further 4 to 5.9 percent.
Andrew Cummings, Head of Residential Agency at Savills Middle East, said, “Dubai’s continued success owes much to the continuing maturity of the city. With world-class infrastructure alongside safety and security, Dubai is rapidly cementing its status as the number one lifestyle destination. An undersupply of ready property, combined with the development of new high-quality developments, is leading to increased pricing. The diverse nature of Dubai buyers means that demand continues to be robust. Meanwhile, further government visa reforms, including reducing the spending requirements to secure a ten-year golden visa, have further boosted demand in the sector.”
Suffering from weaker sentiment associated with higher interest rates and the challenging economic backdrop, the prime residential markets of Los Angeles, New York, San Francisco, Seoul, London, Singapore, and Hong Kong are all forecasted to see price falls this year.
Sellers said, “We expect it to be a year to watch the markets globally. Countries which account for approximately 40 percent of the global population will go to the polls this year, and housing will likely be front of mind for many voters and policymakers alike. The potential for central banks to also cut interest rate during mid to late 2024 may also boost activity across prime property markets and could surprise on the upside for pricing in the latter part of the year.”
Dubai also recorded rental price increases during the year at a little under 10 percent, versus the average 5.1 percent recorded among other global cities in the Savills index. Lisbon led prime rental growth among the 30 cities in the index, increasing 39 percent last year.
Commenting on rentals, Sellers said, “In the face of economic uncertainty, the prime residential rental market proved resilient in 2023. Continuing a trend from the past year, prime rental value growth outpaced capital values, largely driven by a lack of stock in global prime markets and increased levels of demand from individuals and families who would look to purchase a property, but are holding off until the economic and interest rate situations stabilise.”
In terms of yields, Dubai stands out as a high yielding city by world city standards, with returns of 4.8 percent. Across all world cities, prime gross yields stood at 3.1 percent as global rental markets recorded stronger growth than the sales markets.
The cost of buying, holding, and selling a property in Dubai is also among the lowest, at less than 10 percent of the property purchase price, versus 15 percent, on average, across the 30 global cities.
Ends
Also read: Dubai real estate transactions jump 20% to Dh634 bn in 2023
