09.09.2024 13.09.2024 112 0 0 Author Elena Kirichenko
The expectations and forecasts of numerous analysts were not confirmed, and the value of Dubai real estate continued to grow rapidly. There was no drop in prices in either the first or second quarter of 2024. The local market has once again reached new records, surpassing the figures of the previous year.
What price dynamics will real estate in the Emirate demonstrate in the near future? Will the sector begin to stabilize? There are several scenarios for the development of events.
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Indicators of the first half of 2024
Many experts in the Dubai real estate market predicted a decrease in value at the beginning of the year. The reasons for the expected decline could be inflationary spikes, the Palestinian-Israeli conflict and changes in bank rates in the world, which are becoming increasingly difficult to predict. However, the indicators of the first three months did not meet analysts’ expectations: the market trend towards growth remained.
According to statistics provided by the online platform DXB Interact, 36,506 transactions were made in the Dubai real estate sector from January to March 2024. This indicator increased by 17.5% year-on-year. In the second quarter, the number of transactions amounted to 43,261, which is 43.8% more than in the same period last year.
In July, the average cost of 1 m2 in the emirate reached 17,513 AED ($4,768). This is a record figure for the last decade. According to Natalia Bakalym, sales manager of the development company Object 1, it is extremely difficult to assume that prices for Dubai real estate will decrease against the background of current statistics.
“From 2020 to 2023, prices for the purchase of real estate increased by 33%, and for rent – by 42%. And so far there are no prerequisites to expect that they will fall in 2024. This is evidenced by the rating of the Swiss bank UBS, which has been researching real estate markets in different countries since 2015 and establishes the risk of a so-called price bubble, the appearance of which has been predicted for Dubai for many years. The cities in this ranking are divided into 3 categories: with a high risk of a bubble, with an overvalued market and with a healthy market and fair prices. Dubai is currently in 23rd place out of 25, in the green zone of fair prices, with a coefficient of 0.14. This means that his risk of a bubble is one of the lowest in the world. For comparison, Zurich is in first place in the red zone with a coefficient of 1.71. Other cities in the red and orange zones are Tokyo, Miami, and Munich. Real estate in these cities is overvalued, and the risk of a bubble, respectively, is also high, much higher than in Dubai,” says Natalia Bakalym.
The cyclical nature of the market
Experts have speculated about the decline in Dubai real estate prices in 2024 based on the theory of the cyclical market. The first phase is rapid growth, the second is a recession, and the third is a new stage of recovery, and at a higher rate. In total, the theory includes three cycles.
The culmination of the first phase took place in 2009. It was followed by the expected decline in value against the background of the global financial crisis. Then prices resumed their growth, reaching record levels in 2014, and then fell again along with oil prices. The third stage was launched at the end of the COVID-19 pandemic and is still ongoing.
Some analysts believe that the peak of growth typical for the third cycle is in 2023-2024. And it is expected that there will be no sharp decrease in cost. It will be adjusted, after which, along with the influx of foreign investments, the next cycle will begin.
Is cycle theory no longer relevant?
More and more experts agree that the Dubai real estate sector has moved beyond cyclical dynamics and reached a state of steady growth. Adherents of an alternative point of view note that most of the objects are currently bought for personal use – for moving and living. This trend ensures a continued increase in value.
Current real estate prices in most of the emirate have exceeded the figures of 2014. The reason for this is the undying interest of European and South Asian investors in local projects.
Another factor influencing the growth of the market is the increase in the population of Dubai, stimulated by government initiatives. As part of the state program, 5.8 million people will live in the territory of the emirate in 2040.
The rapid increase in population will be one of the reasons for the high demand for 40,000 facilities commissioned in 2023 and for 39,000 facilities scheduled for completion in 2024. Some analysts predict that the cost adjustment will take place in 2026-2027 as a result of the high level of supply.
What is the Government of the Emirate doing to preserve the market?
Read more
Investments in Dubai real estate in 2024: market conditions, forecasts and promising projects
Natalia Bakalym said that current market trends in Dubai differ significantly from the trends of previous years.
In 2009, investors sought to capitalize on a sharp increase in value, but the sector suffered from the global financial crisis. In 2014, there was a glut of the market and an oversupply of supply. The Government of Dubai has taken into account both of these cases and has taken a number of measures to avoid similar situations in the future.”
The reforms aimed at preserving the market include:
- sanctions for companies that do not comply with the construction schedule;
- increase in the tax rate on the transfer of ownership of real estate to 4% of the value;
- mandatory use of escrow accounts for development organizations.
Against the background of such measures, the Dubai real estate market is steadily developing, and investors are not afraid of another recession.
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