Does Dubai’s luxury property market still offer opportunities for investors?

Investors looking to enter Dubai’s luxury property market this year will need to brace themselves for what could be a record year for capital values.

Even as the pandemic-fuelled global property boom begins to abate, UAE demand is being helped by a limited supply of homes at the top end of the market, visa reforms and the role of property as a hedge against inflation.

“The uptick in the market since 2021 is still continuing, making many valuators and sellers price properties in anticipation of an upward trend,” says Chris Whitehead, managing partner at Luxhabitat Sotheby’s International Realty, which sold two of the top-value villas this year.

“This, combined with the reduced supply in the luxury properties segment, means there is at least a 3:1 ratio of buyer to a sought-after property.

"Naturally, this results in each transaction pushing the boundaries furthermore, which is why we are seeing more and more record transactions.”

Capital values in Dubai’s residential sector have expanded significantly over the past 12 months, particularly at the top end of the secondary market.

The wider residential market saw prices increase by 10.9 per cent in the year to May 2022, real estate consultancy CBRE says.

Villa prices rose 19.8 per cent, while apartments had an increase of 9.6 per cent.

But prime residential units — in Palm Jumeirah, Emirates Hills and Jumeira Bay Island — surged by 58.9 per cent over the past 12 months, according to a report by global consultancy Knight Frank.

It estimates that villa and apartment transactions between January and May 2022 alone were worth Dh61.9 billion ($16.85bn).

“Villas remain highly sought-after, not just by domestic buyers, but also by international high-net-worth individuals who continue to flock to the city to snap up the emirate’s most luxurious homes,” says Faisal Durrani, head of Middle East research at Knight Frank.

Investors rethink their priorities

Overall sales are being driven principally by foreign investors, Reuters reported in a May 30 poll of 13 property market analysts.

India and Europe remain strong source markets, according to Dubai-based property consultants Mira Estate.

Worldwide, economic interventions such as quantitative easing and low interest rates fuelled real estate demand during the pandemic, as lockdowns forced people to rethink their priorities.

“One could say the UAE was ready for this change and has the right solutions for local and international high-net-worth buyers, with multiple new developments located on the periphery of the city’s epicentres, which promised housing solutions with an enhanced community experience,” says Ari Kesisoglu, president of listings portal Property Finder.

Government initiatives, such as the expansion of the 10-year Golden Visa programme and new types of residence permits for retirees and remote workers, have contributed to rising prices.

A rapid Covid-19 vaccine campaign and the high-profile Expo 2020 Dubai further improved investors’ perception of the UAE.

“Simply put, Dubai offers greater lifestyle, security and value for money than other major cities in the world,” says Peter Smithson, sales director at Belleview Real Estate.

The government’s response to the pandemic means that investors have now added stability to that list, Mr Smithson says.

“When compared against other nation’s responses, this added stability is a major driving force in high-net-worth individuals flocking to Dubai, driving up demand for the luxury segment and subsequently causing a steep rise in property valuations,” he says.

Belleview set a new record for a Dubai property sale in March with a 10-bedroom beachfront villa on Palm Jumeirah for Dh280 million ($76.2m). The sale breached the previous high of Dh185m set in 2015.