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Dubai realty matures as end-users dominate

Buyers seeking mortgage finance rise 44% during the third quarter

The Dubai real estate market is showing signs of maturing, as more and more end-users are entering the market, a new report showed.

The Betterhomes’ Dubai Real Estate Market report for the third quarter, identified end users among the proportion of buyers as increasing from 45 per cent to 52 per cent. “Rising rents and a desire to establish long-term foundations in Dubai pushed renters into the sales market,” the report said. This has led to a continued demand for mortgages, with finance buyers accounting for 44 per cent of all transactions, in spite of the continued higher rates, it added.

The Dubai real estate market recorded 28,249 transactions in the third quarter. This was a 4 per cent increase versus the second quarter and 23 per cent higher than the same period in 2022. This was entirely driven by 34 per cent growth in villa and townhouse transactions, with apartment transactions contracting by 4 per cent.

The Dubai real estate market recorded 28,249 transactions in the third quarter. This was a 4 per cent increase versus the second quarter and 23 per cent higher than the same period in 2022. This was entirely driven by 34 per cent growth in villa and townhouse transactions, with apartment transactions contracting by 4 per cent.

“The Dubai real estate market continued to go from strength to strength, with a busy summer period resulting in record transaction volumes, up 22 per cent year on year. Property prices rose in many key communities, resulting in a 49 per cent increase in the total value of transactions. Alongside ongoing growth in the real estate market, the announcement of major infrastructure projects, like the relaunch of Palm Jebel Ali and the expansion of Hessa Street, showed Dubai’s commitment to achieving its 2040 plans,” Richard Waind, chief executive officer of Betterhomes, said.

The total value of properties sold in Q3 was Dh79.3 billion. This was a 13 per cent increase compared to Q2 2023 and 49 per cent higher than Q3 2022. The total value of apartment sales decreased by 15 per cent in the secondary market and 6 per cent in the off-plan segment, leading to a 9 per cent overall drop. In comparison, the total value of villa and townhouse sales increased by 54 per cent. This was driven primarily by a 55 per cent increase in the value of secondary market sales, which accounted for over 80 per cent of the villa market, with off-plan villa transactions increasing by 48 per cent.

Following 3 consecutive quarters of decreasing villa and townhouse transactions in the secondary market, Q3 saw a 38 per cent increase. Off-plan transaction numbers dropped by 0.4 per cent in Q3, accounting for 49 per cent of sales, whilst secondary market transactions grew by 8 per cent. Signed secondary market MoUs continued to outpace 2022, up 68 per cent for the quarter, however MOU activity in September was slightly less buoyant, up only 16 per cent against September 2022, data showed.

One of the most prominent findings is the substantial shift towards end-user demand for villas and townhouses. The report indicates a remarkable 38 per cent quarterly increase in transactions, accompanied by a striking 55 per cent surge in the total transacted value for secondary market villas and townhouses. Additionally, end users now account for 52 per cent of all transactions, representing a notable increase from 45 per cent. This shift is primarily driven by the pressing issue of rising rental costs and a growing desire for enhanced security.

In stark contrast, the value of apartment transactions has seen a 9 per cent decrease, with a more significant 15 per cent drop in the secondary market, and a 6 per cent decline in off-plan sales.

Betterhomes witnessed a marked shift towards domestic demand in Q3, as the summer months kept some international investors at bay, while residents searched out villas and townhouses in greater numbers in the face of rising rental costs. The proportion of buyers identifying as end users in Q3 2023 was at its highest since early 2021 at the height of the pandemic. However, there were some signs in the past month that buyers were less willing to chase double-digit price increases, with the rate of growth in new MOUs signed in September falling below previous months’ highs.

 In the rental market, a lack of available stock in popular communities continued to put upwards pressure on rental prices, with occupancy rates at properties managed by Betterhomes at record levels. A 19 per cent annual decrease in new leasing transactions suggests that rising rental prices have motivated tenants to renew their leases, rather than seek new ones. With inventory from the surge in new development not expected to materially impact supply until 2025, tenants are unlikely to feel much relief from rental price rises in the near future

“Dubai continues to attract expats from across the globe, with the population growing by almost 100,000 in the year to July. With the UAE expected to attract 4,500 millionaires in 2023, rapid growth persists in the luxury segment,” Waind said.