Dubai’s prime real-estate prices jumped 89% over the past 12 months, buoyed by a deluge of wealthy buyers setting up second homes in the city, according to property consultant Knight Frank.
“Insatiable demand” fueled villa price rises of more than 100% in high-end neighborhoods such as the Palm Jumeirah, Emirates Hills and Jumeirah Bay Island since the start of the pandemic, according to the consultancy. The upturn is a significant departure from the emirate’s two previous market cycles, which were largely linked to buy-to-let or buy-to-flip purchases.
Demand for Dubai property is booming as the government’s handling of the pandemic and its liberal visa policies attract more foreign buyers. The luxury end of the emirate’s real-estate market is benefitting from an influx of wealthy investors such as Russians seeking to shield their assets, bankers fleeing strict Covid restrictions in Asia and rich Indians seeking second homes.
“Prime residential values in Dubai continue to strengthen, growing by 29% in the third quarter alone, fueled by a persistent deluge of ultra high net worth individuals who are zeroing in on Dubai’s premier districts, in search of second homes,” said Faisal Durrani, head of Middle East research at Knight Frank.
The sale of properties priced more than $10 million also hit a new high. During the first nine months of the year, there were 152 so-called ultra-prime sales, eclipsing last year’s 93.
In another change to previous cycles, the number of new luxury homes planned is failing to keep up with demand, creating a shortage for waterfront homes in particular.
“We see that just 8 new villas are due in Dubai’s prime residential areas between 2023 and 2025 – all of which are on Jumeirah Bay Island,” Durrani said. “Developers have not yet rushed new projects to market as we have seen in the past to capitalize on the tsunami of demand for luxury housing.”
In the short to medium term, Knight Frank expects prices to grow 5% to 7% by the end of the year, ending 2022 about 60% to 80% higher than last year.
A strong dollar and the rising interest rates may impact the market, although the prevalence of cash buyers is “expected to shield the market to an extent,” it said.