Demand for luxury properties in Dubai is outstripping market supply as buyers now seek to own prime holiday homes and permanent residences in the emirate, according to industry sources.
Between 2021 and today, high-end properties from all of Dubai’s major developers have sold, and they are now selling for gold on the secondary market, according to real estate brokerage Union Square House (USH). .
Sales transactions in Dubai started to pick up after the easing of COVID-19 restrictions in 2020, but the bulk of transactions were outside the premium category. At the time, most investors adopted a buy-to-let model, buying small-scale, low-cost units in bulk to earn higher returns, according to the USH.
“At the height of the pandemic and for a very long time, every luxury residential unit worth more than US$1 million was a drain on Dubai’s property market. High-end properties were barely selling as Dubai has become a predominantly buyer’s market as a result of COVID-19,” USH said.
Influx of millionaires
About a year into the pandemic, Dubai has witnessed an influx of millionaires drawn to the emirate by investment opportunities and its standard of living, particularly following its handling of COVID-19 .
The number of high net worth individuals (HNWIs) in the emirate rose to 54,000 in June 2021, up 3.8% from six months earlier, according to New World Wealth.
“The influx of millionaires that Dubai is witnessing has boosted the luxury market. Today, investors are still looking for high returns on their investments. However, the main reason for their investments now is to own a super-premium house in Dubai. This has created a market shift in the luxury property category, reversing the tables and causing investor demand to exceed market supply,” said Gaurav Aidasani, Founder and Managing Director of USH.
Appetite for prime residential properties started to grow in the fourth quarter of 2020, but it was in 2021 that the market saw record transactions, according to Edward Macura, a partner at real estate consultancy CORE.
Key draws for Dubai
The rise in demand for luxury properties has been driven by competitive pricing. Other major strengths for Dubai, Macura added, are its demonstrated ability to manage the pandemic, hosting Expo 2020, connectivity, 100% foreign ownership of businesses and a series of visa reforms.
“2021 saw the highest secondary transactions above 10 million dirhams ($2.7 million) over the past decade, with Palm Jumeirah accounting for almost 35% of these transactions,” Macura told Zawya. .
“Demand for the luxury market comes from both end users and foreign investors looking to relocate or buy a second home in Dubai. Compared to most cities around the world, prime waterfront properties continue to be competitively priced in Dubai,” Macura said.
However, with the lack of inventory in the secondary market, investors have shifted their interest to the main off-plan market. “Recent launches in the high-end market reflect this trend and have seen strong uptake,” he said.
Macura pointed out that although there have been a record number of large transactions, the luxury market still represents a small fraction of Dubai’s overall market. Transactions above 10 million dirhams represented only 3.3% of all secondary market transactions and 1.4% of all off-plan transactions during the first quarter of 2022.
(Reporting by Cleofe Maceda; editing by Seban Scaria)