21.10.2024 28.10.2024 2310 0 0 Author Elena Kirichenko
In the first 2 quarters of 2024, the real estate market in the United Arab Emirates continues to show steady growth, which confirms its stability. Dubai continues to be a key driver of this growth, offering investors a wide range of unique opportunities. At the same time, interest in other emirates has increased significantly. This is due to the fact that alternative cities offer the same affordable and diverse housing options, which makes them attractive to various categories of buyers. In the context of such changes, it is especially important to study the most popular areas for real estate investments in the country.
Given the variety of offers, potential investors can find suitable options based on their financial capabilities and preferences. Thus, an analysis of current trends in the real estate market will allow for a deeper understanding of which regions may become the next centers of attraction for investments, as well as how this will affect the overall market in the coming years. Studying these factors will help investors make more informed decisions, taking into account changes in supply and demand.
In this article, we will take a detailed look at the key aspects of the UAE real estate market. We will discuss the prospects for its development, Dubai’s achievements, including new records and the growing demand for luxury facilities. We will also touch on the increase in rental rates, the shortage of commercial premises and interest in secondary housing in Abu Dhabi. We will not ignore the new resort in Ras Al Khaimah and the market growth of Sharjah thanks to free-holding zones.
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UAE Market Prospects
According to experts from the German company Statista, by the end of the year, the volume of the Emirati market will reach $ 710 billion, of which $ 410 billion will be for housing. Annual growth from 2024 to 2028 is expected to be 3.03%. This will lead to an increase in volume to $ 800 billion.
Statista also notes that demand for luxury projects is growing rapidly in the emirates. The reason is the interest of wealthy foreigners interested in profitable investments.
Dubai: new records
The year 2023 was a record year for the Dubai real estate market in terms of the number of transactions and volume. Many analysts expected that a recession would occur at the beginning of this year, which would lead to price adjustments. However, their assumptions were not confirmed: the growth did not stop during all 6 months.
According to the data of the analytical portal DXB Interact, a total of 79,767 transactions were concluded in Dubai in the first half of 2024, which is 30.4% more than in the first half of last year. The amount of transactions reached 232.6 billion AED ($63.33 billion), which is 29.7% higher than last year’s figures. The average cost of 1 m2 from April to June was 16,318 AED ($4,443). This is a quarterly record of the last decade.
Experts’ forecasts for the coming years vary. Some believe that there will be a slight price adjustment in the city, after which the fourth growth cycle will begin. Others suggest that the emirate has moved beyond the cyclical system, so a recession is not expected. Some expect the cost to decrease in 2026-2027, when the number of offers will increase due to the commissioning of new projects on the market.
Jasko Miletik, CEO, owner and co-founder of Dubai Rapid Properties (Jasko Miletik, CEO, owner and co-founder of Dubai Rapid Properties (DRP), believes that Dubai prices still have potential for growth. The main factors that can contribute to this are global crises, including military conflicts. The Emirate remains a safe haven, which attracts foreign buyers of real estate, stimulating the market.
I am sure that prices can rise even more. And that’s exactly what will happen in the future, instead of adjusting. Of course, you can understand the buyers. I am planning to purchase a property myself, and I would really like to see prices decrease. But do I believe it? No. High demand will continue to drive prices up,” the specialist shared.
Demand for luxury properties
The Dubai luxury real estate segment continues to grow rapidly. In the first 2 quarters of 2024, 190 transactions were concluded with facilities worth from 36.73 million AED ($10 million). Their combined price was 11.75 billion AED ($3.2 billion). Analysts note that in most cases, elite class housing is purchased by wealthy buyers for personal use.
It is also worth paying attention to branded projects that are being developed in cooperation between developers and hotel chains, fashion houses and automotive concerns. Against the background of the influx of wealthy buyers, such facilities will remain in high demand. Their indisputable advantages are prestige, brand awareness, exclusive amenities and services, design and luxurious finishes. The average cost of 1 m2 of such real estate reaches 70,000 AED ($19,000).
Increase in rental rates
The rental value of real estate is also increasing. According to the consulting corporation Delloite, by the end of last year the average rental rate was 990 AED ($270) per 1 m2. A special calculator developed by the Real Estate Regulatory Authority (RERA) demonstrates how much landlords can raise fees for a particular residence. But in some cases, this calculation allows you to increase the rate to 20% per year.
Some of the tenants were forced to give up housing in the central part of the city. Many are moving to peripheral areas with lower rental rates. As a result, the demand for housing in communities such as Damac Hills II and Dubai South has increased.
Some experts expect the rental price to stabilize by the summer of 2025, when 37,000 new facilities will be put into operation.
Yasko Miletik notes that today most of the transactions in the Dubai market take place with off-plan projects. The property under construction cannot be rented out immediately after the conclusion of the transaction, which is why the rental supply is lower than demand. Therefore, it is not worth waiting for a decline in rental prices in the near future. By the end of this year, they will either remain at the same level or rise even higher. More accurate forecasts can be made at the end of August with the arrival of many foreigners in the city.
Shortage of commercial facilities
The commercial real estate sector is facing an acute shortage of space. In the first quarter of 2024, the occupancy rate of office facilities was 91.3%. 3 new DIFC Square buildings will be erected in the Dubai International Financial Centre Free Economic Zone in order to meet the rapidly growing demand. 55,742 m2 or 60% of these projects will be allocated for office space.
The result of the incessant increase in the cost of real estate in Dubai has been the growing interest of buyers in alternative properties located in other emirates.
Abu Dhabi: growing demand for secondary facilities and a shortage of office space
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The capital’s real estate market has faced a surge in demand and a moderate, but still noticeable increase in value compared to Dubai. In the affordable housing sector, the price of 1 m2 increased by 10% for apartments and by 6% for houses. The elite segment showed an increase in prices by 6% and more than 10% of apartments and houses, respectively.
Wealthy buyers choose luxury real estate in coastal projects such as Al Reem Island, Al Raha Beach and Yas Island. More affordable facilities can be found in the communities of Al Reef, Al Ghadeer and Khalifa City.
The increase in the value of 1 m2 in both sectors is the result of increased demand for real estate from investors. However, the average prices for Abu Dhabi properties are still a third lower compared to Dubai. This makes the capital attractive to foreigners.
In early July, the supply of commercial space in the emirate market fell critically. The occupancy rate of 4 Abu Dhabi Global Market (ADGM) buildings in the island community of Al Maryah has reached 95%. To resolve the current situation, the local government has decided to expand the free economic zone. This will allow 10 times more commercial facilities to be put on the market than were previously available in ADGM. Thus, the area of 14.4 million m2 will become one of the largest business districts in the world.
Yasko Miletic explains that Abu Dhabi, despite significant successes, will not be able to compete with Dubai. According to the expert’s forecasts, in the next decade, no city in the Middle East region will overtake it in terms of the growth rate of the real estate market.
Ras Al Khaimah: New Island, short-term rentals and Wynn Resort
The market of the resort emirate also faced noticeable growth. Over the past 8 months, the value of local real estate has increased by 20-25%. At the same time, developers launched 1-2 new projects every week of the second quarter.
The rental rate is also rising. In 2023, the cost of renting apartments increased by 10.5%, and houses by 9.37%.
1-bedroom apartments remain the most in demand, since most buyers choose housing for its subsequent rental to tourists or seasonal holidays.
The surge in demand has not bypassed luxury real estate either. High customer interest touched on branded projects, spacious apartments with 3 or more bedrooms, as well as villas priced from 7 million AED ($1.9 million) located in coastal areas.
One of the key factors playing a role in the development of the market is the Wynn Resort resort project, which includes casinos and hotels offering a total of 1,500 rooms. According to analysts’ forecasts, when the complex is put into operation in 2027, real estate prices in the city will increase by an average of 50%.
Yasko Miletic expert We at DRP are confident in the potential of Wynn Casino. Firstly, because this is a project with a huge capital appreciation, which, in my opinion, will amount to 50%, but many believe even in a 100% increase. Secondly, it is an opportunity to get a golden visa along with a free business license (business license free of charge) for 12 years. There is no such opportunity in Dubai or Abu Dhabi. A free license will save about $12,000 per year, or $144,000 for the entire period
Sharjah: market growth due to freehold zones
Sharjah is one of the conservative emirates of the state, and yet it remains an attractive investment destination. In 2022, the local government passed a law that allows non-citizens of the Persian Gulf countries to obtain full ownership of real estate in freehold zones. The result of such an initiative in 2023 was 14,713 concluded deals, which broke the record in 2017.
The trend of increasing demand continues. According to the local Department of Real Estate Registration (Sharjah Real Estate Registration Department), 10,809 transactions were made in the Sharjah market in the first half of 2024, which is 64% more than in the first half of last year. The total value of the objects sold reached 18.2 billion AED ($4.96 billion), which is 35.6% more than in the first half of 2023.
During this period, foreigners who are not citizens of the Persian states purchased 2,893 properties. The total amount of their investments amounted to 4.8 billion AED ($1.3 billion).
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Summing up the results
In 2024, the growth of the Emirati real estate market did not stop. According to Statista’s forecast, its volume will reach $710 billion by the end of December. The market is likely to grow by 3.03% annually, reaching $800 billion by 2028.
Despite the assumptions of many analysts, the sector did not face a recession at the beginning of this year. The growth trend continued in the first and second quarters, and previous records were broken. Some believe that a price adjustment will still occur, followed by a new round of growth, while others are of the opinion that the cost will decrease no earlier than 2026.
The luxury housing sector is showing some of the most impressive growth rates. In most cases, wealthy buyers planning to move to Dubai purchase such real estate for personal use. Against the background of increasing prices and rental rates, tenants in the middle and economy segment are beginning to look for more affordable options on the outskirts of the city or in neighboring emirates.
Many investors interested in the available options choose Abu Dhabi. ADGM, the main free economic zone of the capital, is faced with a shortage of commercial real estate. To solve the problem, the local government has decided to expand the area.
Over the past 8 months, the value of real estate in Ras Al Khaimah has increased by 20-25%. Experts predict that by 2027 it will increase by another 50%. The main reason for this jump will be the implementation of the Wynn Resort resort project with casinos and hotels, with an expected capital gain of 100%.
The market growth has also affected Sharjah. It is conditioned by granting non-citizens of the Persian Gulf countries the right to purchase real estate in full ownership in some freehold zones. In the first half of 2024, 10,809 transactions were concluded in the emirate, which is 64% more than in the same period of 2023. The total amount of investments amounted to 18.2 billion AED ($4.96 billion).
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