It’s my business to follow the trends in the global uber-luxury market, and recently I’ve been analysing if this sector is truly recession proof.
It’s certainly true to say during times of economic uncertainty, history shows us that people prefer to invest in bricks and mortar, but does that remain true?
While the regional luxury real estate sector is demonstrating continuing resilience in a somewhat tumultuous global market, it is important to recognise recessions can impact any market segment to some extent.
The uber-luxury property segment is not immune to economic downturns. Investors and developers should carefully analyse market conditions, monitor economic indicators and assess specific factors influencing demand and supply dynamics to make well-informed decisions.
So, in a word, no, the sector is not truly recession proof. But I believe it’s as good an investment as any, and remains better than most, especially in the longer term.
There are several factors you should be aware of when considering investing in uber-luxury real estate.
The luxury real estate sector in the Middle East, like any other market, can experience volatility during economic downturns. High-end properties may see longer sales cycles and downward pressure on prices. Economic recessions can affect buyer sentiment and their ability to invest in luxury real estate.
Buyer sentiment is impacted during recessions, which can cause greater hesitancy in investing in luxury real estate projects.
Of course, economic stability plays a major role in shaping the performance of the luxury property market, so any downturn can bring new challenges for developers and investors in the region.
And the luxury real estate sector is most certainly influenced by global economic factors. International investors may be more cautious during recessions, affecting demand and investment activity. Economic crises in major markets can also impact investor sentiment and capital flows.
The local uber-luxury real estate sector relies on both local and international demand. During recessions, the ability of international buyers to invest may be affected, reducing demand. However, local demand, driven by wealthy individuals and businesses, may remain relatively stable. Diversification of demand sources can contribute to the sector’s resilience.
At present, we are seeing a great many global investors flocking to Dubai to make uber-luxury property purchases, with the sales price record seemingly broken every few months.
At the time of writing, Dubai seems recession proof, at least from the perspective of uber-luxury homes. According to data from Knight Frank, in the first quarter of 2023, the city saw 92 sales of properties valued at $10m plus – currently making it the world’s busiest luxury property market, ahead of traditional expensive property hotspots like Hong Kong and New York.
While we know that recession generally leads to a lowering of property prices and longer sales funnels, this clearly isn’t the case on our shores. Knight Frank also revealed that sales exceeded US$3.1 billion in H1, 2023.
Government policies and regulations, including those related to taxation, foreign ownership and investment incentives, can impact the luxury real estate sector. It is gratifying that we live in a nation where the government is very investor-friendly, and makes it as easy and straightforward as possible to invest in property, with all the associated perks and benefits, such as visas and tax breaks.
My opinion is that, yes – uber-luxury property investment can be shaken by recession, but I think in the local market, we are not seeing any effect of market volatility – given the scarcity of such properties, and the global love for everything Dubai and the UAE have to offer.