Dubai: Why property prices, rentals will continue to rise next year also

Strong demand is outpacing supply at a faster rate this year than estimated, especially after the UAE’s removal from FATF Grey List

Read more...
by

Waheed Abbas

Published: Sun 28 Apr 2024, 11:51 AM

Last updated: Sun 28 Apr 2024, 10:02 PM

Property prices and rentals in Dubai will continue to witness a rise until 2025 given that the population in the city is growing 300 per cent faster than fresh supply of properties in the first quarter of this year.

Real estate industry executives are extending their forecast for the three-year rally to next year as strong demand continues to outpace supply at a faster pace this year than estimated, especially after the UAE’s removal from the Financial Action Task Force’s (FATF) Grey List.

In February 2024, the UAE was removed from the FATF’s Grey List, which demonstrated the country’s transparency in financial transactions, hence, raising UAE’s profile among foreign investors.

Advertising
Advertising

Stay up to date with the latest news. Follow KT on WhatsApp Channels.

Initially, the price rally seemed to be slowing down this year, but going by the supply and demand estimates, real estate players are projecting that this rally will likely extend to next year as well, especially in the luxury segment.

“A lack of supply of ready homes is one of the key aspects impacting the market this year. While the population grew by 26,000 in the first three months of the year, we only saw approximately 6,500 new homes being handed over, continuing the pressure on rental stock which has resulted in rental prices increasing 22 per cent year-on-year,” said Richard Waind, chief executive officer of Betterhomes.

“Looking ahead, as Dubai continues to grow and attract talent at its current rate, we can expect current price trends to persist throughout 2024 and into 2025. It won’t be until 2026 and into 2027 that we start to see the volume of supply entering the market that is required to start to take meaningful pressure off prices,” Waind said.

“With the removal of the UAE from the FATF Grey List, the current bull market looks set to be with us for some time to come,” said Waind.

Though the number of units handed over in Q1 2024 is higher by 45 per cent as compared to the same quarter last year, they are still not able to catch up with the demand from the population growth.

Previously, some real estate analysts were expecting a slowdown in prices and rentals, due to inflows from Russia tapering off, but the unabated demand from the high net worth individual investors from other markets such as the US and Canada is keeping the prices and rentals high in the emirate.

According to Cavendish Maxwell’s Property Monitor report released in April, demand for properties priced between Dh3-5 million increased by 2.6 per cent in March as compared to the previous month while demand for Dh5-10 million and Dh10 million-plus properties grew 1.5 per cent and 0.2 per cent month-on-month.

This has prompted real estate developers to rush the launch of new projects in both affordable and ultra-luxury segments. To cash in on growing demand, developers have launched a large number of projects recently, averaging 1 project being launched every 18 hours.

“With the announcement of major developments, an increasing demand for off-plan properties, and a rising influx of population, it is expected that the housing supply will continue to expand significantly over the next 5 years,” said Betterhomes.

This comes as Dubai saw a record transaction of 34,000 in the first quarter of 2024, growing by 20 per cent as compared to the same period last year, officially becoming the biggest quarter on record in the emirate’s real estate market, Betterhomes said.

Off-plan properties continued to dominate the market in the first quarter, accounting for 58 per cent of all transactions as end-users and investors consider off-plan as the right fit. Total sales value grew 25 per cent to Dh87.8 billion. Average villa prices in key communities grew between 11 per cent to 38 per cent while apartments saw a surge in prices ranging from seven per cent to 29 per cent.

Waheed Abbas

Published: Sun 28 Apr 2024, 11:51 AM

Last updated: Sun 28 Apr 2024, 10:02 PM

Recommended for you