Prime residential values in Dubai up by 88.8% says Knight Frank

The overriding challenge for the emirate is the shortage of waterfront homes says a company spokesperson

Analysis by Knight Frank has revealed that prime residential values in Dubai have risen by 88.8% in the last 12 months. The firm notes that the Palm Jumeirah, Emirates Hills and Jumeirah Bay Island are key areas in the city in terms of residential values.

“Prime residential values in Dubai continue to strengthen, growing by 29% in Q3 alone, fueled by a persistent deluge of ultra-high net worth individuals (UHNWI) who are zeroing in on Dubai’s premier districts, in search of second homes. This trend marks a significant departure to the emirate’s two previous market cycles, where the overriding flavour of buyers was linked to buy-to-let or buy-to-flip purchases,” said Faisal Durrani, Partner – Head of Middle East Research at Knight Frank.

He added, “This insatiable demand has fueled villa price rises of over 100% in locations such as the Palm Jumeirah since the start of the pandemic. Elsewhere, ultra-prime homes sales (homes priced at over US$ 10mn) have also hit a fresh high. The first nine months of the year have registered 152 ultra-prime sales, eclipsing last year’s all time high of 93. And in fact, 93 of these deals have taken place in Q3 alone.”

In September 2022, DAMAC Properties’ GM said that Web3 is transforming the UAE real estate landscape.

Discussing the Palm Jumeirah, the firm said the average transacted price of $831.45 per sqft (psf) remains the most affordable compared to Emirates Hills ($1,421 psf) and Jumeirah Bay Island ($1,727 psf).

Andrew Cummings, Partner – Head of Prime Residential, added: “The bulk of international buyers are being drawn to Dubai’s unrivalled sun-sea-sand lifestyle, which tends to come with villa purchases, and this is where demand continues to intensify. Indeed, the city just set a new record price, with the sale of a $82mnn home on the Palm Jumeirah. At around $871.2 psf, Dubai’s Prime residential neighbourhoods remain amongst the most affordable in the world. This, combined with the high quality of residential product now available in the upper echelons of the market, is cementing Dubai’s position as one of the world’s leading second homes markets.”

Commenting on the luxury homes market, Knight Frank says that Dubai’s perennial challenge has been its ‘build-it-and-they-will-come’ mantra, which has seen more homes being built than the market is capable of absorbing. In this cycle however, the number of new homes planned is failing to keep pace with demand, it pointed out.

In early October 2022, JLL signed an agreement with a Qatar real estate brokerage firm to boost property investments.

Durrani elaborated, “On the surface, with nearly 81,000 units due by the end of 2025, the city appears well supplied. However, once that figure is broken down, we see that just eight new villas are due in Dubai’s Prime residential areas between 2023 and 2025 – all of which are on Jumeirah Bay Island. Developers have not yet rushed new projects to market as we have seen in the past to capitalise on the tsunami of demand for luxury housing.”

He continued, “The overriding challenge for the emirate is the shortage of waterfront homes. The revival of Deira Islands as The Dubai Islands should help to alleviate the drought of ultra-prime homes once the development plans are finalised, albeit it is likely to be a few years yet before the first homes are ready to move into here.”

Looking ahead, in the short to medium term, the firm says it does not foresee demand stalling and, in fact, pointed out that it expected the mainstream market to register price growth of 5-7% by the end of the year.

For Prime Dubai, prices are likely to end the year around 60-80% higher than 2021. The COVID-comeback cycle which began two and a half years ago has thus far seen values increase by 101% on the Palm Jumeirah and 98% on Jumeirah Bay Island, while Emirates Hills has experienced a near doubling in prices over the same period, it remarked.

Durrani stated, “With increasing global economic uncertainty, Dubai is once again emerging as a safe port in the storm. The unrelenting demand from international UHNWI when combined with the shortage of waterfront homes, the government’s world-leading response to the pandemic, positive business sentiment, one of the most business friendly environments anywhere and arguably some of the globe’s best beach front real estate is what underpins our outlook.”

Knight Frank cautions, however, that the global nature of Dubai does leave it somewhat exposed. The impact of the strong dollar on international demand whilst too early to assess, appears limited given the residential market’s relative value when compared to other global gateway cities. In addition, while rising interest rates will undoubtedly pose challenges to mortgaged buyers, the bulk of purchases (c.80%) are cash transactions, which is expected to shield the market to an extent, the firm said.

The firm concluded by saying that Dubai’s residential market outlook remains bright.

Later in October 2022, Savills revealed the top second home locations with an emphasis on wellness.

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