Demand for luxury properties in Dubai is outstripping market supply, as buyers are now looking to own prime holiday homes and permanent residences in the emirate, according to industry sources.
Between 2021 and the present, high-end properties by all major developers in Dubai sold out, and they are now selling at a premium in the secondary market, according to real-estate brokerage Union Square House (USH).
Sales transactions in Dubai started to pick up after COVID-19 restrictions eased in 2020, but the bulk of the deals were outside the premium category. Back then, most investors adopted a buy-to-let model, buying small-scale, low-ticket units in bulk to achieve higher returns, according to USH.
“At the height of the pandemic and for the longest time, every luxury residential unit worth more than a million US dollars was a burden on the real estate market in Dubai. Premium properties were barely selling as Dubai turned into an efficiently buyer’s market in the wake of COVID-19,” USH said.
Influx of millionaires
A year or so into the pandemic, Dubai witnessed an influx of millionaires drawn to the emirate by opportunities for investment and by its living standards, especially in the wake of its handling of COVID-19.
The number of high-net-worth individuals (HNWIs) in the emirate rose to 54,000 in June 2021, up by 3.8% from six months earlier, according to New World Wealth.
“The influx of millionaires that Dubai is witnessing has been boosting the luxury market. Investors today still seek high returns on their investments. However, the main reason behind their investments now is to own a super-prime home in Dubai. This has created a market shift in the luxury property category, turning the tables and causing investor demand to outstrip market supply,” said Gaurav Aidasani, USH Founder and Managing Director.
According to Edward Macura, Partner at real estate consultancy firm CORE, appetite for prime residential properties started to increase in the fourth quarter of 2020, but it was in 2021 when the market record saw deals.
Key draws for Dubai
The rise in demand for luxury properties has been driven by competitive prices. Further key draws for Dubai, Macura added, are its demonstrated capability in managing the pandemic, hosting of Expo 2020, connectivity, 100 percent foreign ownership of companies and a range of visa reforms.
“2021 saw highest secondary transactions above 10 million dirhams ($2.7 million) in the last decade, with Palm Jumeirah accounting for nearly 35 percent of these transactions,” Macura told Zawya.
“The demand for the luxury market is stemming from both end-users and overseas investors looking to relocate or buy a secondary home in Dubai. Compared to most global cities, prime waterfront property continues 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 prime off-plan market. “Recent launches in the high-end market are reflecting this trend and have seen strong absorption,” he said.
Macura pointed out that while there has been a record number of big-ticket deals, the luxury market still represents a small fraction of the overall Dubai market. Deals above 10 million dirhams accounted for just 3.3 percent of all the transactions in the secondary market and 1.4 percent of all the off-plan deals over the first quarter of 2022.
(Reporting by Cleofe Maceda; editing by Seban Scaria)