Dubai luxury real estate continues to grow at record-breaking levels

11/04/2023 by Ali Sajwani

Last year saw an 18% increase in the number of High-Net-Worth Individuals (HNWIs) moving to Dubai, making it the place with the highest concentration of millionaires in the Middle East.

And what do these wealthy people need? Somewhere luxurious to live, of course. Or at least, a hi-spec property to invest in. Either way, HNWIs are driving higher demand for luxury properties in a market that currently cannot keep up with demand.

And that’s not necessarily a bad thing – I believe that luxury is worth waiting for, right?

Scarcity increases prices, and a market with rising property prices is a good one to invest in. A rise in house prices generally encourages consumer spending and drives economic growth.

Property market insight from Knight Frank suggests prime residential values across Dubai rose by a massive 89% between 2021-22, with Q3 2022 witnessing a 29% rise alone.

Furthermore, the global realtor says that figure is a reflection of the high number of HNWIs looking to purchase second homes in the emirate.

This emerging trend marks a sea change in the local real estate market, with the emirate’s two previous market cycles seeing buyers predominantly making buy-to-let or buy-to-flip purchases.

I’ve noted great demand in the last 18 months, and also seen price rises north of 100% in super prime locations such as the Palm Jumeirah, which witnessed a record villa sale of some US$82 million.

Meanwhile, the $US10m-plus ultra-prime residential segment has also hit a high. By August 2022, 152 ultra-prime sales were registered, surpassing the previous record set in 2021 of 93 sales.

So you can see that while in other markets, economic and geopolitical volatility and lack of luxury property coming on to the market caused many to pause their search for luxury property investment, that simply isn’t the case in Dubai.

However, a recent Forbes Global Properties report [NV1] suggests that globally, UHNWIs and HNWIs are known for looking beyond short-term market issues, and for viewing property purchases as a safe way to lock in their wealth.

Regardless, we are seeing demand outstrip supply and so prices are rising, competition is fierce and I’m sure we will see some more records broken in 2023.

I’ve talked before about the rise of branded residences – but it was only when  I was researching this article that I learnt that Dubai is the world leader in this sector – offering wealthy property investors the chance to choose from some 40 different branded residences, with another 30 such properties in the development pipeline over the next few years.

This sector is growing, too, as people want to enjoy all the trappings of luxury living – with all the extras – under one convenient, hotel style roof.

People – especially HNWIs – are more globally mobile than before, so a branded residence suits this lifestyle, with the option of renting out a property while not living in it, through the brand owner.

Management consultancy Boston Consulting Group reports that financial wealth in the UAE is growing rapidly – and is expected to accelerate at a CAGR of 6.7 per cent to $1 trillion in 2026, from $700 billion in 2021.

Furthermore, BCG suggests this growth makes the nation one of the fastest growing in the world – ensuring further inflows of investment and wealthy people.

In fact, recent news, again backed by figures from Knight Frank, reveals that Dubai now ranks as the world’s fourth most active luxury residential market, only behind New York, Los Angeles and London.

The city saw the sale of 219 homes valued over US$10 million in 2022, with these transactions yielding some US$3.8 billion.

It seems to me that our young city is now establishing itself as a serious contender among the world’s long-established hub cities as a sought-after luxury residential market. Given the appeal and the value Dubai’s properties offer wealthy buyers – US$1 million invested in the city’s prime residential zones will yield around 1,130 square feet of space, approximately five-times more than Hong Kong and three-times more than London or Singapore – this trend of attracting HNWIs and UHNWIs looks set to continue well into the future.

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