Historically, the Dubai real estate market has gone in cycles.
In 2005 we saw a major peak which resulted in a 2008 crash. It did not take long for the market to recover and in 2014, we were at an all-time high again, only for the market to crash in 2018. The year 2021 has seen property again at an all-time high which only leads to the speculation of when is it going to crash again.
I don’t believe it will – there may be a slight correction but I think the days of seeing major downward swings are gone. The market today is a more mature one. Today an investor can build up a portfolio and earn double digit growth on the investment even during a downturn.
These are the investors we see in Dubai’s real estate market now:
1. The old-fashioned flipper: These are the ones who made millions during the real estate boom in 2004 and 2005 by buying pre-launched real estate and flipping it for triple digit returns in a matter of days or weeks. By the time the property reached the end user, it had doubled or tripled in value – the main reason why the markets always corrected themselves. These investors will see lesser opportunities as developers are taking advantage of the first few flips themselves at present. This is resulting in better projects being built.
2. End user: They form the foundation for any real estate market in the world. With Dubai’s population continuing to grow, end users will always be a big part of the space and create the stability that is needed.
3. Investors looking for a yield: This has been the investor who lost out in Dubai over the past year. With laws supporting the tenant, it has also become very difficult – if not impossible – to evict a tenant who is paying a low rent, hence reducing the yield for the investor. For this investor, a 3-5 per cent return is just not attractive enough.
The vacation rental market has allowed multiple benefits to the Dubai real estate space and that is why I think the days of major crashes are long gone. I think you will see steady growth and slight corrections – if any – over the next few years.
As an investor looking to grow a portfolio and earn a fixed income on their investments, short-term lets offer between 8-15 per cent returns after all expenses. Another benefit is that the real estate is also well maintained and easy to sell unlike when it is given to a long-term tenant.
With these kind of returns, it is an attractive investment area for large funds and family offices.
Real estate in Dubai is also undervalued when compared to global cities. And because of this, investors can potentially double their money in a period of five years through short term rental income and property appreciation.
To compare, if you take a one-bedroom apartment on the Palm Jumeirah or JBR in a building that has access to a private beach, you are looking at an investment of approximately $650,000. The same quality apartment in LA, Miami, New York or Barcelona would cost between $1.5m- $2m.
The combination of supply finally increasing in Dubai and short term rentals will redirect the market from having a major crash towards a slowdown, only to rise again a few years later.
Dubai’s real estate market, over the next 10 years, still has a tremendous amount to grow as new projects still keep getting announced. But I am certain that in 10 years, taking inflation into consideration, you are not going to get the same one-bedroom at $680,000; we would have reached global levels by then, and that same unit will be worth over $2m.
Vinayak Mahtani is the CEO of bnbme holiday homes
FAQs
During 2022, the average prices for real estate increased by 9.5%. The cost of apartments rose by 9%, while villas increased by 12.8% during the same period. In December 2022, average apartment price in Dubai constituted AED 1,168 (USD 318) per sqft, and the average villa price was AED 1,385 (USD 377) per sqft.
Is it a good time to buy property in Dubai 2022? ›
Dubai Land Department (DLD) in its report has revealed that the real estate market has finally gotten back on track successfully in 2022 after the pandemic. Though facts and figures have already made a major revelation that 2023 is the time to buy a property in Dubai .
Is it a good time to invest in Dubai property market? ›
Despite the reality that the buying market worsens globally, Dubai is showing no signs of slowing down. The real estate market is off to a strong start in 2023, and it is anticipated that it will prosper similarly to 2022. 88,028 transactions were made in total in 2022, surpassing 240 billion, a 61% increase over 2021.
What is the future of the real estate market in Dubai? ›
Dubai's real estate market is expected to grow to over AED 300 billion by the end of the year. Unique Properties, a leading real estate agency in Dubai has stated that they see a strong surge in the sector for the second half of 2023.
Is 2023 a good year to buy property in Dubai? ›
Dubai has established itself as a prime destination for real estate investment, and this trend continues in 2023. The city's dynamic economy, favorable government policies, and robust infrastructure make it an attractive choice for both local and international investors.
What to invest in Dubai 2022? ›
Real estate investment in Dubai has a lot to offer such as easy payment plans, high rental yields, interesting price policies, and tax exemptions. But to enjoy all these benefits, real estate investment in Dubai should be done through reliable and professional real estate.
Will house prices go down in 2023 Dubai? ›
House Price Inflation Is Expected To Drop Off
The city's property market will continue to see price rises in the next few years. However, these increases will slow down to just 4.5% and 3.0% respectively in Real estate Dubai 2023 and 2024.
Will real estate prices go down in 2023 Dubai? ›
Galtsev predicts that the real estate market in Dubai will continue to grow rapidly for another three years. “This year, 2023, will be the biggest in terms of transaction volume and property value growth. Over time, the rate of growth will decrease, but currently, it's the peak opportunity to enter this market.
Is it a good time to sell property in Dubai? ›
“The current and projected market conditions are in favour of owners of Dubai residential properties if they are thinking to sell or rent their units as demand for ready property outperforms supply, especially in sought-after locations,” says Nikita Kuznetsov, Partner Metropolitan Group and CEO of Metropolitan Premium ...
What is the property forecast for Dubai 2023? ›
Forecasts predict that the real estate sector will reach AED300 billion by the end of 2023. In 2022, sales volumes in the emirate registered AED261 billion, showing a 75 percent increase from AED149 billion in 2021.
British, Indian and Russian nationals were top investors in Dubai's real estate market in the first quarter of 2023, according to Betterhomes' latest figures released on Thursday. Among other nationalities, investors from Italy, Lebanon, Egypt, Turkey, France, China and the UAE made up the top 10 list.
Why not to invest in real estate in Dubai? ›
Property laws in Dubai are different from those in many other countries. In some cases, there have been instances of fraud or disputes related to property ownership. It is essential to have a thorough understanding of the legal framework and seek professional legal advice before investing in Dubai's property market.
Will Dubai real estate prime residential market to see strongest growth in 2023? ›
In Q2 2023, Dubai's residential market saw a significant increase in sales volume and value, with over 30,000 property transactions and a total sales value of over AED 91 billion.
Are house prices going up in Dubai? ›
Dubai's luxury home prices are set to rise 13.5 per cent this year after rising 44 per cent in 2022, the highest increase globally.
Does property value increase in Dubai? ›
The average home price in Dubai climbed 12.8% in the 12 months through March 2023, while the average residential rent surged 26.3% over the same period, according to real estate adviser CBRE Group Inc.
Will Dubai property prices come down? ›
Property prices in Dubai are enjoying its best phase ever and the current bull run in the emirate's real estate market is different from the two previous peaks in 2008 and 2014. According to a leading expert, prices are unlikely to come down in the near future.
What is the average price of a house in Dubai 2022? ›
According to ValuStrat, the average residential prices in Dubai reached around 1,223 United Arab Emirates dirhams (AED) in 2022, up from around 894 AED in 2020.
