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Dubai realty posts 37% Q2 growth as ultra-rich rush in

Real estate transactions reached 27,215 in the second quarter

Dubai’s real estate market continued to perform well in the second quarter of 2023, delivering the second highest volume of transactions on record to post a 37 per cent year-on-year growth. The surge was driven an increasing number of high net-worth individuals sought a safe haven, tax efficiency and positive investment returns.

According to the latest Dubai Land Department data published by Better Homes, real estate transactions reached 27,215 in the second quarter, with the total value of properties sold touching Dh69.8 billion.

The Q2 transaction growth was driven entirely by apartment transactions, which increased by 57 per cent, as individuals choose to buy rather than face escalating rental costs. High-net-worth individuals (HNWIs) from India and the UK remained the largest buyers of real estate in the second quarter.

“Given our robust performance in 2023 and the number of MoUs signed, we expect transactional volumes to remain strong in Q3,” Richard Waind, group managing director of Betterhomes, wrote in the Q2 2023 Residential Market Report.

“As we look towards the rest of the year and beyond, Dubai looks set to continue to be a major benefactor of increased global migration of high net-worth individuals and capital. Strong GDP numbers, population growth, and high investment returns are set to continue, with long-term projections for Dubai's real estate market looking very healthy,” said Waind.

In the first half, Dubai recorded 61,000 sales deals with a total value topping Dh179.34 billion, as per a research report from W Capital. “The real estate sector continues to break records in terms of sales and transactions,” said Walid Al Zarooni, CEO of W Capital Real Estate Brokerage. “The first half of this year recorded the best semi-annual performance in history, benefiting from the supportive factors within the market and the continued economic momentum,” he added.

A sudden upswing in property investment from HNWIs between 2012 to 2022 has placed Dubai’s real estate market on track to achieve Dh300 billion in sales this year. According to a report by Unique Properties, Dubai houses over 68,400 HNWIs – a 62 per cent increase over the past decade.

Villa and townhouse transactions decreased by 9.0 per cent, largely due to limited supply in the secondary market and a lack of new villa community launches. Rising prices and strong demand continue to incentivise developers to launch new projects, with over 34,000 units launched so far this year. Compared with Q2 2022, off-plan transactions have increased by 67 per cent, versus a 15 per cent rise in secondary market sales, the Betterhomes report said.

The report noted that mortgage demand remains strong, accounting for 41 per cent of secondary transactions in the last quarter. “While we can expect some further tightening of interest rates, more positive inflation data from the US suggests we are very near to the peak of this tightening cycle. In the coming months, any confirmation that interest rates have now peaked, and could even be cut in early 2024, will likely provide additional support to demand beyond 2023.”

The report said supply of ready properties remains tight, putting pressure on both sales and leasing prices, but new launches in the first half of the year hit over 30,000 homes and look to be on target for a record year. “New inventory from the surge in development post-Covid probably won't impact liveable supply to any significant degree until 2025-26, so it is unlikely that tenants will see any relief from rental price rises in the medium term.”

Strong demand and the limited supply of new properties continued to push prices higher in most communities last quarter. Dubai Production City recorded the strongest growth in apartment prices, up 23 per cent. Living Legends and Al Habtoor City, two communities which featured in the top three for apartment price growth in Q1, followed with 21 per cent and 13 per cent increases. Jumeirah Islands saw the fastest growth in villa prices, up 13 per cent QoQ and 32 per cent YoY. Villa prices in popular expat communities also grew significantly, with JVT, JVC and Dubai Hills Estate recording a 6-9 per cent increase.