2023-05-11-莱坊-Dubai_Residential_Market_Review_Winter_2022-23_9页_11mb

Dubai Residential Market Review Summary

Core Content Overview

This report provides a comprehensive analysis of Dubai's residential real estate market during the winter of 2022/23, focusing on price trends, supply dynamics, rental performance, and market outlook.

Mainstream Price Trends

• Price Growth: Residential values in Dubai rose by 2.6% during Q3 2022, marking the 7th consecutive quarter of price increases.
• Apartment vs. Villa:
  • Villas increased by 1.9% to AED 1,350 psf, now 14.3% higher than last year but still 7.2% below the 2014 peak.
  • Apartments rose by 2.7% to AED 1,130 psf, with an 8% increase over the last 12 months, yet still 24.2% below the 2014 peak.
• Post-Pandemic Performance:
  • Villas have seen a 33.8% price increase since January 2020, significantly outperforming apartments' 5.7% growth.
  • Prime areas such as the Palm Jumeirah and Emirates Hills have experienced stronger price growth than the mainstream market.

Affordability and Market Demand

• Affordability: Dubai remains one of the most affordable luxury home markets globally, with most submarkets having house price to income ratios below 6x.
• Prime Affordability: Despite being the most exclusive, prime residential areas in Dubai (Palm Jumeirah, Emirates Hills, Jumeirah Bay Island) are still affordable, with average prices at AED 3,220 psf or US$ 870 psf.
• Ultra-Prime Demand: Ultra-prime homes (over US$10 million) have seen a record year in 2022 with 152 sales in the first nine months, compared to 93 in 2021.
• Buyer Profile: Ultra-high-net-worth individuals (UHNWIs) and international buyers are the key drivers of demand in the luxury and prime segments.

Supply Dynamics

• Supply Pipeline:
  • New supply is skewed towards apartments, with 63,000 units (77%) of the total supply through to 2025 being apartments.
  • 50% of apartment supply will be concentrated in Mohammed Bin Rashid City, Business Bay, Downtown Dubai, and Dubai Creek Harbour.
• New Projects:
  • Azizi's Entisar Tower on Sheikh Zayed Road is set to be Dubai's second tallest building.
  • Burj Binghatti Jacob & Co Residences will be the tallest residential tower in the world upon completion in 2025.
• Ultra-Prime Supply:
  • Only 8 new villas are planned for Dubai's prime residential areas between 2023 and 2025, all on Jumeirah Bay Island.
  • Six Senses on the Palm Jumeirah has sold 100 apartments, accounting for 11% of prime sales between January and September.

Rental Market Performance

• Rental Growth: Rental yields have remained stable at 6.5%, with lease rates growing in line with capital value increases.
• Rental Rates:
  • Villas on the Palm Jumeirah have seen a 44% increase in rents over the last 12 months, now at AED 141 psf.
  • Affordable villa locations such as The Springs and Arabian Ranches have also experienced high rental growth (nearly 22%).
  • Apartment rents have risen by 27% since last year, with Palm Jumeirah and Downtown Dubai leading the way at 40‰ and 38‰, respectively.
• Rent vs. Peak:
  • Apartment rents are 11.7% above pre-COVID levels but 22.7% below the 2015 peak.
  • Villa rents are 39% above pandemic start levels and only 3.9% below the 2015 peak.

Market Outlook

• Mainstream Market: Expected to grow by 5-7% by the end of 2022, with a similar rate in 2023.
• Prime Market: Likely to end the year 50% higher than 2021, with 13.5% annual growth expected in 2023, the highest globally.
• Affordability: Despite the UAE dirham's fixed peg to the US dollar, affordability remains strong for international buyers, especially from South America and Eastern Europe.
• Cash Purchasers: Now account for 80% of total transaction value, indicating a shift in buyer behavior due to rising interest rates.

Risks and Challenges

• Global Uncertainty: Dubai's position as a safe haven during the pandemic has continued, with strong fundamentals supporting the market.
• Supply Constraints: The build-it-and-they-will-come approach is still present, but new ultra-prime supply is limited, with only 8 new villas planned in prime areas.
• Off-Plan Sales: Off-plan purchases account for 40% of transactions, aligning with the 10-year average and lower than 2019 and 2020.
• Currency Impact: The strong US dollar may affect affordability for European and UK buyers, but this impact has so far been negligible.

Expert View

• Residential Stock Evolution:
  • International buyers are increasingly drawn to luxury and waterfront properties.
  • Developers are focusing on contemporary, ultra-modern designs and smaller, more private developments.
  • The Mediterranean style is being replaced by modern luxury.

Key Contacts

• Andrew Cummings: Partner - Head of Prime Residential, Middle East

  • Email: Andrew.Cummings@me.knightfrank.com
  • Phone: +971561224229

• Shehzad Jamal: Partner - UAE StratCon-Healthcare | Education | Real Estate

  • Email: Shehzad.Jamal@me.knightfrank.com
  • Phone: +971564101298

• Stephen Flanagan: Partner - Head of Valuation & Advisory, MENA

  • Email: Stephen.Flanagan@me.knightfrank.com
  • Phone: +971508133402

• Imran Hussain: Partner - Head of Residential Valuations

  • Email: Imran.Hussain@me.knightfrank.com
  • Phone: +966 55 552 3659

• Dean Foley: Associate Partner - Residential Project Sales & Marketing

  • Email: Dean.Foley@me.knightfrank.com
  • Phone: +971501060784

Research Team

• Faisal Durrani: Partner - Head of Middle East Research

  • Email: Faisal.Durrani@me.knightfrank.com
  • Phone: +971504219562

• Alaa Aljarousha: Manager - Middle East Research

  • Email: Alaa.Aljarousha@me.knightfrank.com
  • Phone: +971565489626

• Lubaba Fakeih: Geospatial Analyst

  • Email: Lubaba.Fakeih@me.knightfrank.com
  • Phone: +966 55 552 3659

Conclusion

Dubai's residential market continues to show resilience and strong growth, particularly in the prime and ultra-prime segments. While mainstream prices remain below the 2014 peak, villas and prime apartments have experienced notable increases, driven by UHNWIs and international demand. Affordability remains a key strength, and cash purchases are becoming more dominant. Despite global macroeconomic uncertainties, Dubai's market fundamentals and business-friendly environment continue to support sustainable growth.