Impact of 2023 Global Recession on Dubai Property Market (2024)

Dubai real estate sectorshowed an upsurge last year where there was more than a 60% increase in overall units sold, and the off-plan sector was leading the way. However, there is some uncertainty among the people regarding the real estate sector’s performance, given the word of imminentglobal recession in 2023.While some experts say that the UAE will dodge the recession, albeit with a slowdown, the UAE economy is expected to maintain a steady GDP growth rate of around 5% in 2023, as projected by the central bank for 2022. Notably, itis a decrease from the 7.6% projected for 2022 in the previousyear.

We will consider some of the recent effects of this slowdown and mention the factors that should allow the emirateand Dubai real estate sectorto ride this global economic slump smoothly.However, the most notable factor is that recently,Sheikh Mohammed has unveiled a staggering $8.7 trillion economic plan,which will help the country to fight back the global recession on several fronts.

The Global Recession

According to the World Economic Forum’s Chief Economists Outlook, the economic outlook for 2023 will vary depending on location. While the overall global outlook is bleak, with 20% of respondents expecting a global recession, which is double the number from September, there are significant regional differences. Most chief economists anticipate moderate tostrong growth in the Middle East, North Africa, and South Asia, while over 90% expect weak growth in the US and Europe.

The survey was conducted in November and December 2022, and since then, the World Bank has predicted a global recession for 2023, with GDP growth at 1.7%, the lowest rate since 1993, excluding the 2009 and 2020 recessions.The UAE government will leave no stone unturned to make things easier for the residents and investors alike as46% growth is already projected for Dubai real estate sector in 2023.

UAE market slowsdown

On Friday, in the third week of January 2023, the stock markets in the UAE closed slightly lower as investor sentiment turned negative due to concerns of a global recession sparked by recent US consumer data. Additionally, comments from US Federal Reserve officials regarding the need for sustained rate hikes to combat inflation further dampened risk appetite.

Abu Dhabi’s index (.FTFADGI) decreased by 0.04%, with losses in the industrial and energy sectors dragging it down. Alpha Dhabi Holding (ALPHADHABI.AD) and Multiply Group (MULTIPLY.AD) both saw declines of 0.4% and 1.1%, respectively. However, shares of Abu Dhabi Ports Company (ADPORTS.AD) rose 1.1% after the company signed agreements to improve maritime connectivity and establish a new joint venture for a multi-purposeterminal at the Port of Luanda.

Oil prices were up by AED 2.53 or 0.80% at AED 319.01 a barrel at 1130 GMT. In Dubai, the main index (.DFMGI) fell by 0.02% due to pressure from the industrial and utilities sectors, with Dubai Electricity and Water Authority (DEWAA.DU) seeing a 1.2% drop.Despite the considerable drop, we must not forget theimpact of $8.7 trillion economic project on Dubai real estate,in particular and on the country, in general.

Impact on properties in Dubai

Year 2022

Even while the housing market saw signs of recession in the US and elsewhere in 2022, the real estate market in Dubai was a stark contrast; here, record sales were being seen as properties for sale in Dubai were quickly being bought, and there was an upward trend. Property prices are increasing andescalating prices of apartments and villas tend to drive Dubai real estate growthahead as well.

Outside the UAE, it was different; for example, the rise in interest rates, from close to zero in January to over 4% by the end of the year, has impacted buyers’ ability to afford real estate. Higher interest rates are typically detrimental to the market, and this increase in rates is the primary reason for the slowdown in the property market seen in the US and Europe. The higher interest rates in the West are having a significant negative impact on their real estate markets.

And according to Reuters, this trend is forecasted to continue with house prices in the US, which are predicted to decrease by 12% in 2023, with the outlook for the UK is even direr, as Bloomberg reports that prices may drop as much as much as 30% by 2024.

Why the difference?

Dubai is less affected by interest rate increases due to the high proportion of cash buyers and the positive impact of higher oil prices on the economy. According to the National Association of Realtors, cash buyers in the US make up around 22%, while in the UK, 31% of property purchases are done with cash. In the UAE, cash buyers make up over 70% of purchases on average, largely due to the international nature of the market.

Despite the fact that higher interest rates tend to curb rising prices, the market in Dubai has so far been resilient to these increases, and transaction volume has not been affected.Therefore, investors should be confident and can pick from these5 best communities to buy properties for sale in Dubai in 2023, without worrying much about returns, due to the positive economic outlook.

Year 2023

The UAE has successfully positioned itself as a safe haven for people and their capital. There is a renewed influx of migration to Dubai, which is likely to drive the real estate market in 2023 and beyond. During the pandemic and post-pandemic, factors such as lockdowns, high taxes, cost-of-living issues, natural disasters, and ongoing conflicts in other regions have led many international citizens to seek a safe environment for their families and businesses, and the UAE has worked to attract these people through visa and business reforms.

According to a global citizenship company, Dubai is projected to be the top destination for ultra-high-net-worth migration, surpassing the US. With the opening up of China in 2023, we can also expect a renewed flow of tourists and residents. As a result, Dubai’s population has surpassed 3.5 million this year and is projected to grow to 5.9 million by 2040, with an annual influx of approximately 110,000 new residents. All of these factors are predicted to allow the emirate to ride the recession safely while keeping an uptrend for the properties market in the region.

Government initiatives to boostDubai property sector

Dubai recently unveiled an ambitious economic plan worth AED 32 trillion ($8.7 trillion), which aims to double foreign trade and investment over the next ten years, with the goal of further solidifying its position as a premier global financial hub. Being the Middle East’s center for business and finance, the emirate, which is part of the United Arab Emirates, has been working to deepen trade routes and attract global firms as it faces increasing competition from other regions. The plan targets foreign trade to reach AED 25.6 trillion by 2033 and aims to attract an annual foreign direct investment of around AED 60 billion.Seeing everything inDubai before and after, you must be sure that all roads lead to Dubai.

However, besides the vital measures to boost the economy, the emirate has made legal and policy changes to improve the ease of business and maintain its appeal to foreign investors and talent. Dubai started the year by eliminating a 30% tax on alcohol. In previous years, the UAE lifted the ban on unmarried couples living together, adopted a Monday-Friday workweek, and introduced new visas which permit foreigners to work, live and study without the need for a sponsor.

Properties in Dubai to lookout for in 2023

Dubai is an ever-growing hub of luxury real estate and investment opportunities. In 2023, a few of the most popular upcoming properties include:

Madinat Jumeirah Living Asayel 1 is a residential development by Meraas, offering a selection of one, two, and three-bedroom apartments. The development offers lavish amenities, such as a private swimming pool, a fitness centre, a children’s play area, a multipurpose hall, and a jogging track.

Spring at Arabian Ranches 3 is a development by Emaar, offering three, four, and five-bedroom townhouses. The development is in a prime location, close to the Arabian Ranches Golf Club and the Dubai Polo & Equestrian Club. It also provides access to several amenities, such as a gym, a swimming pool, a jogging track, and a children’s play area.

La Rosa 2 is another residential development by Meraas, offering a selection of studio, one, two, and three-bedroom apartments. The development is located in a prime location in Dubailand, close to major attractions and amenities. Residents can enjoy access to a state-of-the-art gym, a swimming pool, a children’s play area, and a jogging track.

Other upcoming real estates to watch out for include the Waves, SURF, Burj Crown, Marina Vista, Grand Bleu Tower, The Valley, Riviera, and Wilton Park Residences. They are all residential developments located in Mohammed Bin Rashid City, offering a selection of studio, one, two, and three-bedroom apartments. The complexes are close to some of the city’s most famous landmarks and provide access to various amenities, such as a swimming pool, a gym, a jogging track, and a children’s play area.

Conclusion

Here is an insight into the global recession and its impact on the properties in Dubai. However, the good news for investors and residents alike is that, as forecasted, the effects of the worldwide economic slump will not be that harsh on the emirate compared to other places. Mainly,due to the nature of transactions since they are more cash-centred than mortgage or interest-based. Also, the initiatives taken by the government will act as countermeasures to lessen the impact on the markets, including the real sector of Dubai.