Dubai’s real estate market is poised for robust growth in 2024, driven by a confluence of factors contributing to a sustained rally. The surge, fueled by rising foreign fund inflows, tenants transitioning to property ownership, and an increasing inventory of ready-to-move-in properties, is expected to continue, albeit at a more measured pace compared to the remarkable 20-25% price increases witnessed in 2023. Analysts project a growth rate of up to 10%, underpinned by strong demand from residents, investors, and high-net-worth individuals.
Prime residential areas such as Jumeirah, Downtown, and Palm Jumeirah are anticipated to remain at the forefront, spearheading the market’s trajectory. This continued appeal is attributed to various factors, including the influx of foreign funds, a growing trend of tenants becoming property owners, the availability of move-in-ready properties, and heightened investor interest in long-term residency programs like the Golden Visa, Retirement Visa, and Freelance Visa.
Prathyusha Gurrapu, Head of Research and Consulting at Cushman & Wakefield Core, anticipates a steady increase in prices ranging from 5-10% throughout 2024. While the pace is expected to slow down, the positive market sentiment and sustained demand are likely to support this upward trajectory. Waterfront locations like Palm Jumeirah and Jumeirah Bay, alongside established districts like Downtown Dubai, are projected to witness relatively higher price increases in the coming year.
Moody’s Investors Service notes a 15% increase in property prices in both Dubai and Abu Dhabi since the second quarter of 2021. The forecast indicates healthy real estate market conditions for the next 12-18 months, although demand is expected to taper compared to the robust performance of the past two years.
Gurrapu foresees upcoming areas such as Dubailand and Mohammed bin Rashid City experiencing relatively lower price increases, particularly as major handovers are anticipated. The government’s persistent efforts to enhance Dubai’s appeal for investors, tourists, and residents are expected to underpin positive market sentiment, job creation, and population growth across various income segments.
The evolving dynamics of the property market reveal two distinct buyer types: UAE-based residents grappling with affordability challenges due to escalating property prices, inflation, and interest rates; and high-net-worth investors supporting off-plan demand, many of whom are cash buyers. The proportion of cash buyers has notably increased over the last two years, capitalizing on the UAE’s reputation as a safe haven.
For instance, nearly 60% of Sobha Realty’s total sales in 2022 were cash transactions to non-UAE residents. Conversely, UAE-based buyers continue to dominate development sales for Aldar in Abu Dhabi and constitute more than half of Emaar Properties’ sales in Dubai.
UAE homebuilders are seizing the momentum, with new projects continually being launched, resulting in an even stronger demand than before the pandemic. Real estate data companies Reidin and JLL report that around 80,000 units are under construction in Dubai and Abu Dhabi in 2023.
Global ratings agency Moody’s anticipates an improvement in homebuilder margins over the next 12-18 months, attributing this to the launch of new projects and increased off-plan sales. This surge in activity has led to a significant increase in revenue backlogs across the industry, contributing to an overall improvement in gross margins.
In summary, UAE-based homebuilders are strategically positioned to capitalize on the growth opportunities in the domestic market. Expectations are that leverage and EBIT to interest expense ratios will remain robust across the board, as these companies continue to launch new projects and secure the majority of cash flow well ahead of project completions. The overall outlook for Dubai’s real estate market in 2024 remains optimistic, driven by a dynamic interplay of economic factors and investor sentiment.
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