The subject of Dubai property prices has created a lot of headlines over the past 20 years.
Investors have seen periods consisting of huge growth and returns, and – like any other market – a few downturns too. What has been consistent, however, has been Dubai’s reputation and prestige as the world’s most luxurious prime real estate market.
Consequently, despite some of the highest per sq ft prices in the world, Dubai real estate still attracts thousands of new investors every year – all expecting to secure returns few markets elsewhere can match.
A history of Dubai property prices
The history of Dubai property prices is one punctuated by startling numbers and written in tones of fiscal reverence.
Of course, the most notable period was the years immediately after the introduction of the foreign ownership decree, a period that has since become known as the gold rush.
From 2002 to 2008, early investors who took decisive action saw Dubai’s property prices increase by 300%, as the emirate emerged as simultaneously as one of the fastest growing property markets and cities in the world.
It was during this period when the ambitious mega-project was birthed.
Even now, almost 20 years on, some of the estimated costs of these projects dwarf those seen in other prime real estate markets:
- Jumeirah Garden City – US $95 billion
- Dubailand – US $64 billion
- The Lagoons – US $25 billion
- Palm Jumeirah – US $14 billion
- The World – US $14 billion
The investment came from all over the world. Europeans, Russians, GCC nationals, and Asians acquiring assets at a record pace. In truth, it wasn’t sustainable and once the supply of finance dried up with the global credit crunch of 2008, transaction volumes and Dubai property price growth not only stagnated, but fell.
Indeed, around AED 1.1 trillion worth of property projects under construction at the time were stalled or scrapped.
It wasn’t until 2012 when the building works returned once more and the second golden period began. Over the next 2 years, property prices in Dubai increased by a further 40%, before the market again began to slow.
Since then, the market has exhibited positive signs of maturity – no more so than the past 12 months.
Current performance behind Dubai property price increases
The recent performance of the Dubai property market has led some analysts and commentators to remark this could be the third golden era of real estate in the emirate.
There have been record quarters and some of the highest capital appreciation in the world, and, yet, despite the headlines and the cyclical nature of Dubai’s past, there is a growing sentiment that this time, Dubai prices are set for slightly more mundane but sustained increases.
Of course, ‘mundane’ here is relative. Relative to 300% and 40% rises of the past. The latest market reports show annual Dubai property prices increased by 10% in July 2022.
Not only is that performance some of the best annual property ROI found anywhere in the world, but it has been achieved in a market that is not yet accelerating as it can – indeed, real estate prices in Dubai are still good value when viewed on a historical basis, being way below 2014 peaks.
Even judging the market during the latest month-long period, you would see that average prices have increased by 1% with more than 6,500 units acquired in what is traditionally the slow summer month of July. In fact, in comparison to July 2021, the volume of property sales has increased by over 50%.
Forecasts for Dubai property prices
A major contributing factor to the recent growth curve has been the coronavirus pandemic. Dubai’s status as one of the world’s most vaccinated places and its existing reputation for luxury lifestyles saw many of the world’s high-net-worth individuals purchase property as they relocated.
The results of this can be seen in the price increases within the villa market. While apartment values have increased by almost 9%, villa prices have recorded almost 18% growth – at the ultra-prime end of the market, the appreciation is much higher still.
Yet as this one-time demand surge subsides, forecasts for growth remain upbeat – particularly in comparison to other global real estate markets that are struggling to maintain any level of expansion in a post-pandemic world.
A Reuters poll of property market analysts published in September 2022 suggests investors can expect average growth of 6.5% in 2022, with this slowing to 3% in 2023. Other prime markets such as London and Sydney are expected to undergo losses in what is seen to be a turbulent macro-economic environment.
Although investors can secure growth across the Dubai market, an oversupply of smaller apartment units, suggests they would be wise to look at larger 2 or 3-bed apartments and villas should they wish to extract the most value over the coming 24 months.
Finally, investors should note the interest rate environment for the coming period. The Central Bank of the United Arab Emirates recently announced the latest rise in the base rate, resulting in a cumulative 225 basis points lift since March. This will make leveraged purchases slightly more expensive – particularly if the U.S. Federal Reserve continues to rise rates given the dirham is pegged to the dollar.
Average property prices in Dubai
Here is a current breakdown of average Dubai property prices and transaction volumes so far in the first 6 months of 2022:
- Business Bay accounts for circa 13.9% of the market and the average property price there is AED 1.1 million
- Downtown Dubai accounts for circa 8.3% of the market and the average property price there is AED 2.4 million
- Jumeirah Village Circle accounts for circa 8.0% of the market and the average property price there is AED 680,000
- Dubai Marina accounts for circa 5.8% of the market and the average property price there is AED 1.5 million
- Dubai Creek Harbour accounts for circa 5.4% of the market and the average property price there is AED 1.9 million
- Arjan accounts for circa 3.9% of the market and the average property price there is AED 599,000
- Dubai Hills accounts for circa 3.6% of the market and the average property price there is AED 1.8 million
- Jumeirah Lakes Towers accounts for circa 3.5% of the market and the average property price there is AED 950,000
- Palm Jumeirah accounts for circa 3.4% of the market and the average property price there is AED 3.1 million
- Al Furjan accounts for circa 3.3% of the market and the average property price there is AED 797,000
You’ll note that despite the performance and despite the undoubted luxury of the Dubai market, these prices actually represent good value on a global scale of prime real estate. In fact, similar properties in New York or London would be three or even four times more expensive.
It’s an important observation, particularly as, already noted, many of the world’s other prime markets are expected to experience corrections or dips next year. It is feasible that a Dubai market already showing new signs of maturity and sustainability will attract some of the capital normally reversed for investment in such markets. Any extra demand for Dubai real estate will no doubt push prices even beyond the levels seen in the current growth forecasts.
Seeking to acquire Dubai real estate?
At Chestertons, we’ve many years of experience operating in the Dubai property market, helping investors acquire assets that outperform even the strongest growth cycles. We have extensive knowledge of all the mainstream and specialist developers operating within the emirate and can help any purchasing decision that you, as an investor, may have.
If you have questions about investing in property in Dubai, please contact us by clicking below.