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Dubai real estate deals surge 43% on high investor demand

Property market is headed for another strong year despite challenges posed by inflation and a supply glut; Resolute economic growth in the Middle East expected to drive strong levels of real estate activity in 2023, says CBRE

Dubai real estate market continued its upward trend as sales transaction surged 43 per cent in February on high demand from the foreign investors and end-users, according to a report.

Latest data released by Property Finder shows that property transactions climbed to 9,020 last month compared to 6,310 in February 2022, generating sales revenue of more than Dh26.7 billion in February this year — an increase of 65 per cent. The emirate recorded 9,800 sales transactions in January 2023.

The existing (secondary/ready) transactions recorded approximately 20 per cent year-on-year growth in volume by registering more than 4,500 deals. The volume of the off-plan properties also surged 77.8 per cent by reaching more than 4,500 transaction last month.

In terms of value, the transactions for existing properties witnessed an increase of around 32 per cent, reaching over Dh15.6 billion compared to Dh11.8 billion in February 2022, recording the highest volume and value for the month of February for in a decade.

Dubai Marina, Downtown Dubai, Business Bay, Palm Jumeirah, and Jumeirah Village Circle remained the top searched areas in February 2023 for apartments while Dubai Hills Estate, Palm Jumeirah, Arabian Ranches, and Mohammed Bin Rashid City were the most desired areas to own rent villas/townhouses.

Ata Shobeiry, chief executive of Zoom Property said the Dubai property market is headed for another strong year despite challenges posed by inflation and a supply glut.

“It will majorly benefit from its strong economic conditions in the Middle East region and the fact that it continues to be the preferred choice of foreign investments and high-net-worth individuals (HNWIs) for real estate investment,” he said.

Positive outlook

In another positive development, CBRE anticipates a positive outlook for the real estate sectors across the Middle East in 2023, as elevated oil prices and resolute economic growth are expected to support strong levels of occupier and investment activity.

The real estate consultancy, which released its 2023 Middle East Real Estate Market Outlook, said the GCC economies will continue to record relatively strong growth rates in 2023.

“Both the hydrocarbon and non-hydrocarbon sectors have seen strong rates of recovery over the course of the last year, with economic growth in the GCC region noticeably outpacing the global average during 2022. Over this period, economic growth in GCC countries recorded an average growth rate of 6.3 per cent and as we move into 2023, their GDP growth is expected to reach 2.7 per cent,” according to the report.

Taimur Khan, head of Research for Mena at CBRE in Dubai, said GCC economies and real estate markets, on the whole, are expected to continue to see performance levels remain relatively strong over the coming year, despite the weaker global economic backdrop.

“In the region’s key office markets, Dubai and Riyadh, with available supply being constrained, we expect rental rates to continue to grow. In other markets, a combination of subdued demand and excess supply will mean rental growth is likely to remain anaemic,” he said.

“Residential markets in the region will likely see somewhat fragmented performance in 2023, supply gluts in certain markets will drive down performance, whereas lack of supply in key business hubs such as Dubai and Riyadh is likely to mean these markets will outperform,” Khan said.

Shobeiry of Zoom Property said the real estate sector in the Middle East region will face challenges in 2023 in the form of inflation and supply gluts, which may result in fragmented performance. However, UAE real estate is expected to surpass other markets as it continues to garner high interest from HNWIs and foreign investors.

Saad Manair, senior analyst at Crowe UAE, said industrial investments on track in Saudi Arabia, that has increased by $8.54 billion in 2022, as part of the country's ongoing efforts to diversify its economy and align with the objectives outlined in Vision 2030.

“About 1,023 factories commenced operations in 2022, with investments totaling $7.7 billion. The big strength of Saudi Arabia is private sector activity, large domestic demand and government assets, whereas the challenges has been the dependence on oil revenue, limited top foreign talent and unpredictable policies. This will have a positive impact on the demand in the real estate market in Saudi Arabia. However, a lot depends on the way in which laws and regulations take shape and that the Saudi Arabia meeting its delivery promises,” Manair told Khaleej Times on Thursday.

Evolution in property preferences

The Property Finder data indicates a significant evolution in property preferences for both owners and tenants as 59.4 per cent of people who have the desire to own property are looking for an apartment, while 40.6 per cent are interested in villas/townhouses.

Additionally, in the rental segment, 80 per cet of tenants have been searching for apartments and 20 per cent are looking for villas/townhouses.

Around 65 per cent of the tenants who are looking for apartments for a long stay prefer furnished properties, while 33 per cent were looking for unfurnished apartments. Unlike the tenants who can afford to rent a villa/townhouse, approximately 55 per cent were looking for unfurnished units, while 44 per cent were looking for furnished villas/townhouses.

“We continue to see a steady demand for housing and a rising inclination towards ownership, further enabling a brighter future for the growth of real estate in the region. 2023 has definitely started on a good note, with a sustained momentum within Dubai’s property sector,” Scott Bond, UAE Country Manager at Property Finder, said.

Referring to the Central Bank of the UAE, Manair of Crowe UAE said credit to the private sector in November 2022 rose by five per cent to $322 billion. The value of UAE banks' gross assets increased by 10 per cent, however, rising interest rates indicate significant monetary tightening that may present challenges for investment in 2023, especially in real estate.

“The big strength of the UAE is Abu Dhabi's fiscal buffers, Dubai's diversified economy, and high talent attraction, whereas the challenges have been dependence on the oil sector, dependency on tourism. Overall, the UAE market position is very strong and will drive the real estate market due to its safety and security and lifestyle offerings,” he said.

One-bedroom apartments top choice

Latest data also noted that around 41 per cent of the tenants were looking for one-bedroom units in February 2023, followed by two-bedroom units, which presented 33 per cent of the tenants' preferences, while 20% were looking for studios. For villas/townhouses, two-bedroom units were the most searched villas for rent by 36.4 per cent, followed by three-bedroom villas/townhouses by 31 per cent.

“With evolving consumer preferences and record Y-oY success this February, we continue to behold a positive outlook for Dubai’s multi-faceted property sector, as a trusted go-to place marketplace for our customers,” said Bond.

Off-plan still demand

The off-plan properties are still attractive for investors as both existing and off-plan transactions recorded the highest performance in February 2023. The off-plan transactions acquired 50 per cent of the total sales transaction and 41 per cent of the total value of the sales transactions last month.

The volume of the off-plan properties increased by 77.8 per cent by reaching more than 4,500 transactions last month compared to 2,533 transactions in February 2022. This also reflected in the off-plan properties value, which increased by 154 per cent worth more than Dh11 billion compared to 4.4 billion in February 2022 to record the highest volume and value for off-plan transactions for the month of February in a decade, according to the report.

In terms of volume, the existing (secondary/ready) transactions recorded around 20 per cent year-on-year increase by registering more than 4,500 transactions. In terms of value, the transactions for the existing properties witnessed an increase of around 32 per cent, reaching around Dh15.6 billion compared to Dh11.8 billion in February 2022 to record the highest volume and value for existing transactions for the month of February in a decade.

— muzaffarrizvi@khaleejtimes.com