All the signs are there – Dubai’s property market is booming. We’ve witnessed some record-breaking sales already this year, and it looks like the market isn’t cooling off anytime soon.
According to a property market analysis from JLL, robust demand and abundant liquidity spurred a flurry of activity, making Q1 2022 the most active first quarter on record. Global transaction volumes climbed 47% year-over-year to US$292 billion.
Locally, total transaction volumes between January and March 2022 hit US$15.3 billion across more than 20,000 transactions, the highest first-quarter rates to date. Off-plan sales were up nearly 95%, and secondary market sales increased by almost 75%. Compared to Q1 2021, 77% more apartments and 58% more villas were sold.
There are several reasons why I think 2022 marks a watershed year for the city’s luxury real estate market:
Post-pandemic confidence
People are keen to invest again, to travel again and to make reliable, solid investments. Also the confidence in Dubai has certainly grown, mainly because of the national response to the pandemic, which has been widely lauded for being swift and effective. Add the renowned safety, world-class infrastructure, global transport links, and year-round good weather, and we can see why the market holds such strong global appeal.
Portfolio diversification
Investors are keen to align their investment strategies with longer-term economic and demographic shifts, and after the fear of the pandemic has subsided, they are looking to make more property investments.
There is still concern over investments in more traditional areas of the world, as the economic issues surrounding the pandemic continue, share prices are volatile and investors are looking for places such as the UAE where economic growth remains stable, at least. A recent report from international bank UBS suggests the UAE’s economic growth is projected to accelerate from 1.4 per cent in 2021 to 4.3 per cent in 2022 and 5.2 per cent in 2023.
Changing society
There’s an influx of wealth coming into the region, and more and more local people view luxury properties as a combination of a weekend retreat and an investment. UAE nationals are keen to invest in their own country, of course, but we are seeing more people looking into luxury property investment as the region exudes positive signals across all economic indicators.
The tax breaks
Dubai’s excellent tax regime – read low to no tax – is now bolstered by liberalising visa rules. Under most circumstances, investment in a luxury property now comes with a long-term residency visa, without clauses or catches. The ten-year Golden Visa is available to those making a secondary or off-plan (mortgaged) purchase over AED2 million, and represents a valuable proposition for investors, delivering longer-term security in the form of residency.
Scarcity
By its very nature, the luxury property market involves scarcity, and we’ve seen prices rising for some of Dubai’s most incredible luxury properties. In terms of the ultra-luxury segment, a lack of supply is causing prices in certain areas to double. As an indication of the price hike, property prices in the Burj Khalifa registered a 23% increase in 2021, according to property firm Knight Frank. Europeans and those from the CIS region are showing a great deal of interest in Dubai’s uber-luxury sector, as are GCC nationals.
Scarcity, of course, will lead to a flurry of new luxury real estate construction activity, I believe, as developers scramble to meet growing demand for ultra-premium properties.
Branded residences
An emerging corner of the luxury market is a rising trend of branded residences and uber-luxury serviced apartments and villas. We will see this continue to grow, mirrored by a surge in the number of ultra-high net worth individuals in the region.
The trend I’m seeing is for larger, more luxurious properties. The concept of a developer joining with an established, renowned luxury (hotel) brand is highly appealing to a wide segment of ultra-luxury investors, given the higher level of amenities, services and build quality.
Investors can even earn an income on a branded residence, as it can join the brand’s global rental ‘pool’ of exclusive properties, earning a decent yield.
However you view the market, it’s clear that the above factors bode well for Dubai and the region’s expanding ultra-luxury segment.
