A spectacular turnaround in Dubai’s property market last year saw the Middle East’s financial hub break a decade-long record for total home sales and lifted rents to unprecedented levels.
(Bloomberg) — A spectacular turnaround in Dubai’s property market last year saw the Middle East’s financial hub break a decade-long record for total home sales and lifted rents to unprecedented levels.
The city registered 90,881 residential transactions in 2022, according to real estate adviser CBRE Group Inc. — beating the previous record of 81,182 deals in 2009. Ejari contracts, or home rental agreements, increased 11% in 2022 compared with a year earlier, reflecting a growth in the city’s residents.
“It’s been an incredible year,” CBRE’s head of research Taimur Khan said in an interview. “This is the highest number of transactions ever, partly because the supply of new homes is increasing, and because the take up has been strong.”
Dubai’s property market has bucked the trend in much of the world, where values have largely dropped amid surging interest rates and an increasingly darkening economic outlook.
In expatriate-dominated Dubai, though, home prices and rents have surged amid an influx of Russians looking to protect their wealth after the invasion of Ukraine, and as bankers fled strict lockdowns in Asia. The arrivals also included Israeli investors, crypto millionaires, and hedge fund executives after the city eased social restrictions and liberalized laws to consolidate its position as the region’s pre-eminent business center.
The average annual rent for a villa — family homes — in Dubai surged by about 25% to 282,150 dirhams ($76,817) in the year to December and average apartment rents jumped 27% to 95,168 dirhams, according to CBRE. The average price of apartments rose 9% and villas 12.8% in that period.
“I think the market will slowly taper off this year,” CBRE’s Khan said. The only surprise that could change that would be a sudden return of investors from China, who were the fourth largest buying group in Dubai until a few years ago, he said. Those buyers tend to be interested in mid-scale investment properties as opposed to Russian buyers, who focus more on the luxury end of the market, Khan said.
About 70,000 homes are currently under construction in Dubai and that additional supply will also help take pressure off rents and prices. But Khan expects the number of properties actually finished in 2023 to be lower as developers stagger the release of housing supply, he said.
“I see a significant moderation in rental rates this year, particularly in some of the core areas,” he said. “Last year’s rental rate increases aren’t sustainable and we’re starting to see resistance with tenants voting with their feet and moving to neighborhoods they would’ve never considered a couple of years ago.”
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