Analysis of the real estate market in Dubai: analytics, forecasts and prospects for 2023

The Dubai real estate market has shown stunning records in 2022. The historical maximum in terms of the number and amount of transactions has been beaten. Will the growth trend continue in the future? How much will real estate prices rise in Dubai? OWRealty agency experts share their analysis of the situation and forecasts for 2023. 

The real estate market in Dubai is growing: is it so?

According to the Dubai Land Department, in 2022, the amount of all transactions in the Dubai real estate market amounted to 72 billion dollars. This is an absolute historical record for the emirate. The number of transactions also became a record - 97 thousand contracts. 

The largest activity was noted at the end of 2022. In December, the amount of transactions amounted to 7 billion dollars. This is the second largest monthly figure for the entire period of existence of the Dubai market. November 2021 remains a record, when the total volume of transactions totaled $8.4 billion. 

Real estate in Dubai is growing in the off-plan housing segment. In 2022:

• 53,700 objects were put into construction (2 times more than in 2021)
• 35,500 facilities were commissioned (5,000 more than in 2021)

At the end of 2022, the growth in sales of real estate under construction amounted to 100% per year in terms of the number of transactions and 144% in terms of their total amount. Sales of finished properties increased by 30%, their price increased by 44%. 

How the results of past years have affected the real estate market in Dubai 

Analysts believe that 2022 turned out to be the best year for the UAE and Dubai real estate market for the entire period of its existence. This was facilitated by the policy of the UAE authorities to attract foreign capital to the country (new rules for issuing resident visas, flexible anti-virus policy, tax incentives) and the activity of developers to withdraw new facilities. 

In 2014, the price of real estate in Dubai reached its maximum, and the record has not been broken so far. Then the cost of housing began to decline. The market recovery began during the COVID-19 pandemic. The JSC government reacted to the situation more flexibly than other states, and did not close the border for foreign citizens. Thanks to this, wealthy people began to consider the UAE as a “second home” or a place for profitable investments. Dubai has become a brand where everything is best - the world's tallest skyscraper, the most convenient business environment, the absence of many taxes, a warm climate and resort-style living. 

As a result, the real estate market determines the economy of the UAE. The country's government actively supports it with its initiatives, stimulating the inflow of foreign capital. 

Prices and demand for real estate in Dubai

Analysis of real estate prices in Dubai in 2021-2022

Analysts call different figures for the increase in property prices in Dubai. On average in the market for 2022, prices increased by approximately 10-11%. The dynamics differ significantly depending on the type of real estate and the area of its location. 

Prices rise the most for luxury and ultra-luxury real estate. This is facilitated by the demand from the wealthiest people from all over the world. At the same time, there is a limited supply - there are fewer and fewer free places for building in elite locations on the coast of the Persian Gulf, and the demand for them does not fall. 

The rise in prices is gradually slowing down, the market is stabilizing. After a meteoric rise in 2021 (21% according to Reuters), 2022 saw a less dramatic increase in home values. 

Analysis of demand by type of housing in Dubai

The COVID-19 pandemic has spurred demand for personal residences. In this regard, the popularity of villas and their price has increased. According to Knight Frank, this type of property has experienced the strongest price increases. From January 2020 to Q3 2022, the price of a villa in Dubai increased by 33.8%, while the cost of apartments only increased by 5.7%. 

Big rise in prices recorded on a man-made island Palm Jumeirah. Since the beginning of the pandemic, villas here have risen in price to 80%. Palm Jumeirah features premium and ultra-premium properties. 

Apartments and studios are often purchased by investors for subsequent rental. Experts note that the area is very popular Jumeirah Village Circle. It is located near the center, dynamically developing and has all the necessary infrastructure. Dubai's "city within a city" is being actively built up MBR City. Analysts at Knight Frank note growth in demand and prices for 26% over the year. 

Average property prices in Dubai in 2022:

• apartments - 272 thousand dollars
• villas - 735 thousand dollars

Popularity among buyers in the Dubai market is gaining townhouses. They have more affordable prices than villas, but in fact they have almost all the advantages of individual housing. Large developers offer townhouses in large communities with all amenities. You can buy a townhouse in Dubai, for example, in areas DAMAC Lagoons And Arabian Ranches 3. 

Property value forecast in Dubai

In 2023, a moderate increase in the cost of housing in Dubai is expected. On average, the forecast for the market is in the range up to 10%. 

The Knight Frank agency predicts a rise in prices in the main market to 7% in 2023, in the luxury housing segment — by 13.5%. This is the most significant increase among major world cities. Analysts at Reuters believe that Dubai property prices will rise by 5% in 2023. 

Looking at price analysis over the past years, investors are wondering if a Dubai real estate crisis could arise or the so-called "bubble". The Swiss financial holding UBS annually assesses the risks of a bubble in the largest real estate markets in the world. Dubai has been in the green zone for several years in a row and is rated as a fair value market. This means that the probability of a bubble is almost zero. 

Dubai Property Market Outlook 2023-2024 

The real estate market in the UAE and Dubai will continue to grow in the coming years. It contributes to:

• An influx of foreign capital, an increase in demand and buying activity from wealthy investors who want to save funds in the face of an unstable situation in the world and the energy crisis
• Moderate rise in property prices 
• An increase in rent that outstrips the increase in the value of the home itself. In 2022, the rent increased in price by 27%. This trend opens up lucrative prospects for investors who wish to earn passive rental income. 
• The consistent policy of the Arab authorities to improve life in the emirates and attract foreign capital
• Increasing volumes of new housing entering the market, a wide variety of offers - from budget to ultra-luxury segment
• Restoration and further development of the tourism industry
• Easier rules for obtaining a resident visa (residence permit in the UAE) and the opportunity to obtain it when buying a home

Conclusion 

Let us briefly summarize the analysis of the real estate market in Dubai in 2022 and the forecast for 2023:

• In 2022, the total amount of transactions amounted to $72 billion
• The cost of housing in Dubai in 2022 increased by an average of 10-11% in the market. In some prestigious areas, an increase to 50% was noted.
• Rent increased by 27% in 2022 
• In 2023, property prices in Dubai will continue to rise at a moderate pace. Analysts forecast growth to 10% in core and 13.5% in premium segments
• Real estate in Dubai has a fair price, so do not be afraid of a bubble

Analysis of the real estate market in the UAE and Dubai shows that the most favorable time has come for investment or buying real estate for personal use. 

The market is stabilizing, demand remains high, and prices are rising at a moderate pace. Against the backdrop of outpacing growth in rental prices, buying a home in Dubai is becoming a profitable investment.