How does Dubai’s luxury real estate sector differ from other regions?

14/09/2023 by Ali Sajwani

I believe 2023 will be remembered as the year in which Dubai made real estate history. In the first six months, the Emirate overtook London, New York and Paris to become the world’s leading luxury property market.

With strong growth predicted across the UAE, the future looks bright. But how does Dubai’s luxury real estate sector differ from other cities and regions across the world? How has it fared since the pandemic compared to other prime property markets?

Supply vs demand

High global demand for residential real estate, good yields and relatively stable interest rates made 2021 a boom year for real estate worldwide. However, as we all know, macroeconomic factors, including high energy prices, rising interest rates and various geopolitical crises, caused some uncertainty among investors in 2022.

By the end of last year, inflation stood at 7.7% in the US and 11.1% in the EU. Slowdowns affected almost all cities on the global luxury real estate map, and in some regions, this is still the case.

In many areas, historically low levels of for-sale properties are causing an imbalance between investors and inventory. Sales and prices in Dubai, however, have continued to surge thanks to persistent demand, despite unfavourable macroeconomic indicators on an international level.

In contrast, supply has been outstripping demand in New York, according to Christie’s International Real Estate affiliates, with global instability negatively impacting the city’s real estate market. London’s property sector also got off to a slow start this year, affected by the weather and the coronation of King Charles III.

The good news is that, even in the midst of these headwinds, the global luxury property market is still faring better in 2023 than many watchers had anticipated.

The luxury of space

Another contributing factor to Dubai’s resilience and success is the fact that it is one of the most affordable luxury home markets in the world right now, with prime prices commanding approximately $850 per square foot.

Monaco has retained its title as the world’s most expensive residential market in terms of how much space $1 million will buy. New York (33 sqm) edges London (34 sqm) and Singapore (34 sqm) on the strength of the dollar, whereas in cities in the Global South like Cape Town and São Paulo, one can purchase more than 200 sqm for the same price.

In Dubai, $1m will secure 105 sqm, five times as much space as in Hong Kong, meaning our Emirate continues to offer fantastic value for luxury investors.

Universal priorities

Regardless of the region in question, high-net-worth individuals (HNWIs) seem to share certain preferences when it comes to luxury home acquisitions. Illustrating the reassessment of priorities that has taken place over the last three years since the global pandemic, outdoor living spaces are top on most buyers’ lists.

Demand is high for safe and private areas to relax and socialise, as well as opportunities to enjoy nature and improve physical and mental health, which is reflected in the growing prominence of Dubai’s green neighbourhoods. According to Forbes Global Properties brokerages, close proximity to lifestyle amenities such as beaches, golf courses and ski slopes represents another top priority.

Throughout Asia-Pacific, Christie’s International Real Estate is seeing buyers looking for more space, with an increase in demand for large landholdings near the central business district of Sydney, for example.

The international effect

At present, luxury real estate brokers in the Asia-Pacific region are seeing increased interest from overseas buyers taking advantage of currency fluctuations like the weaker Australian dollar and Japanese yen. However, international sales declined in nearly half of the world’s luxury markets in 2022. Potential buyers from Asia looking to purchase premium real estate in the United States, for instance, were negatively impacted by exchange rates, interest rates and, in some cases, their ability to transfer funds to the US.

Dubai, on the other hand, experienced no such challenge, with non-Emiratis accounting for approximately 30% of its luxury home purchases in 2022. Of course, the introduction of the Golden Visa initiative has had a hugely positive impact in this respect, but the UAE’s world-class infrastructure, tax and investment opportunities, economic growth, and ability to attract private wealth, capital and talent have also played an important role.

Analysts expect low supply to keep prices buoyant for the rest of the year across many global luxury markets. When one considers the number of millionaires expected to enter the UAE this year from countries like India, Russia, China and the UK – approximately 4,500 in total – Dubai’s luxury real estate sector looks set for further growth. Indeed, demand is so high that neighbouring Emirates, such as Ras Al Khaimah, are also seeing the benefits.

While sharing some of the same challenges and opportunities as other markets, a combination of factors has allowed Dubai to become a leader in global luxury real estate, offering both stability and high growth potential.

Long may it continue.

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