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Where Dubai’s red-hot property market is heading, according to Mashreq’s Zain Qureshi: We’re nearly two thirds into the year, and speculations around where the property market in Dubai is going have yet to abate. The off-plan market has been red hot, as have rentals. And it’s not very different over in other emirates like Abu Dhabi, Sharjah, and Ras Al Khaimah, where investors — many foreign — have been pouring their funds.
We spoke with Mashreq’s global head of real estate finance and advisory, Zain Qureshi, to gauge what demand has looked like over the past eight months, what he expects for prices through to the end of the year and early next year, and a lot more.
Price growth over the past eight months has “exceeded” Qureshi’s expectations, he tells us. The momentum from last year has continued, with off-plan sales thriving over the past six months in particular, he added. Off-plan sales in Dubai alone have drawn in some AED 103.8 bn — accounting for a third of transactions during the period, Qureshi said.
Safety, regulatory openness and investor-friendliness have all boosted demand: The momentum has been driven mostly by a surge in demand post-covid for the golden visa, the UAE’s reputation as one of the safest countries in the world, and its ease of doing business, Qureshi explained.
Luxury buys are still a major attraction: The country’s plethora of luxury offerings has also drawn plenty of high net worth individuals in, which can be seen in the increase in demand for luxury properties in Dubai and Abu Dhabi. Luxury and uber luxury properties currently account for some 12-15% of the market, Qureshi said.
This is mainly because even though they’re luxury, they’re “affordable” in the eyes of foreign investors when compared to counterparts in cities like New York, London, and Hong Kong, Qureshi explained. Not only is much of the market USD-denominated, returns on investment in the market range between 5-9%, he explained.
We’re seeing spillover in rentals to the northern emirates: Rental increases have pushed some residents to the northern emirates, which have seen an increase in demand as of late, he added.
REMEMBER- Annual growth rates in Dubai’s rental market slowed to single digits in 2Q 2024, with villa rental rates growing 4% y-o-y and apartments at 8% y-o-y, property management firm Asteco said recently. During the full 1H, CBRE estimates rents to have increased around 21% y-o-y. Average residential prices in Dubai jumped 21.3% y-o-y in 1H 2024, with apartment prices increasing by 20.7% y-o-y, and villa prices increasing by 24.3% y-o-y.
There’s also spillover on the commercial side: Dubai International Financial Center has seen a substantial increase in demand for grade A office space, which has caused a spillover into Abu Dhabi Global Market, Qureshi said. Limited supply in the industrial market in Dubai has also led to a certain degree of spillover in demand to more accessible areas in the northern emirates, he added. Still, a fair share of land has been snapped up by “top-tier developers” for industrial development this year, he said.
The supply gap won’t let up soon: “The supply crunch is expected to remain in the short to mid term, with an expected 261k of new homes due by 2029, which equates to 43.5k new units each year for the next six years,” Qureshi said, adding that he expects this supply to be absorbed in the market.
Despite the supply increase, a slowdown in sales and price growth could take place in certain pockets of the city as part of a 5-10% price correction cycle sometime in the next 18 months, he noted, adding that geopolitical tensions could potentially affect the market.
Expected interest rate cuts later this year will also drive end-user demand as installments become more affordable, with buyers potentially shifting towards mortgage as the preferred payment model, he added.
LOOKING FURTHER AHEAD-
Expect to see a lot of demand for Dubai South: “We have seen an increase in development activities, as well as sales transactions in Dubai South,” Qureshi said, adding that the expansion of Al Maktoum Airport should improve the infrastructure and connectivity around the area and drive more demand for residential and commercial properties.
