What to expect from Dubai real estate market: luxury real estate sales, rising mortgage rates and off-plan growing demand

Dubai real estate market

Property in Dubai The first quarter of 2022 saw many real estate sales records in Dubai. The most expensive villa in history was sold on the island of The Palm Jumeirah. Will this summer be as hot as the beginning of the year, in terms of the number of transactions?! Buying property in Dubai for foreigners can be a tricky task, but you can always use some help from a verified agency like Ax Capital.- Dubai real estate market

Sales statistics

  • The city recorded the most successful first quarter of the year in terms of residential transactions, with their total volume reaching 7,865 in March 2022, up 83.4% from a year earlier. 
  • Sales volumes of housing under construction increased by 94.6%, in the secondary market – by 76.1%. 
  • The total transaction volume in the first quarter of 2022 reached a record 19,009.

Taimoor Khan, head of research at consultancy CBRE in Dubai, said that despite continued growth in loan financing and further reductions in payment plans, the emirate’s housing market has not yet felt an overwhelming impact on transaction activity.

 “In fact, the total number of transactions in March reached 7,865 compared to 5,598 a month earlier. As a result, this first quarter was the most successful for the emirate in history in terms of registered housing transactions,” he said.

The CBRE report shows that as of March 2022, the average apartment prices were USD 3,287 per sq. m, for villas – USD 3725 per sq. m. Compared to the highs observed at the end of 2014, these rates per square meter are 26.2% and 12.3% below the peak for apartments and villas, respectively.

Global demand for super-luxury real estate in Dubai- Dubai real estate market

Demand for super-prestigious housing in the UAE continues to be concentrated on The Palm Jumeirah, where a deal was recently closed to sell a villa for AED 280 million (USD 76.23 million). The previous record was AED 185 million (USD 50.37 million) and has not been broken since 2015.

The custom-built villa has ten bedrooms and ample living space, equipped with a seven-star spa hotel, furnished by Italian furniture houses Giorgetti and Minotti. At the disposal of residents and guests there is a private beach with a length of more than 70 meters.

It should be noted that cash buyers bought just over 30 houses in the city worth USD 10 million in the first three months of 2022. In 2021, 93 houses were sold, including many for more than AED 100 million. “The cumulative value of USD 10 million properties sold in 2021 was more than the cumulative value of properties sold during the entire 2015-2020 period,” said Faisal Durrani, Head of Middle East Research at Knight Frank, a UK-based consulting company. “Since the start of 2022, luxury home sales have been solidly at the same level, or at least close to the 2021 figure. This means that the demand for luxury real estate from the ultra-rich is not decreasing.”

Hurry up with a mortgage- Dubai real estate market

However, in this whole barrel of honey with an incredible increase in sales, there is also a fly in the ointment. Buyers of real estate in the UAE will soon have to make a buying decision quickly as mortgage rates are expected to rise in the near future. The US Fed’s decision to make 6 more rate hikes this year will see UAE mortgages bounce back to 5%+.

So those who were planning to buy a house on credit need to speed up. After all, mortgage rates could very well reach 4.75-5.25% during this year compared to the average 3-3.5% available now.

The U.S. Federal Reserve has already passed its first base rate hike since 2018, raising it by 0.25% from near-zero levels seen over the past two years. This decision was immediately reflected in the lending rate of the UAE Central Bank. According to industry sources, the number of real estate transactions made on credit has been steadily increasing since the second half of last year. “While 2021 began with real estate sales predominantly in cash only (these transactions accounted for 70% of the market), by the end of the year this share had dropped to 50%,” an industry source said. “In the last three months of 2021, real estate loan sales rose significantly as developers resumed with new off-plan housing project launches.”

In the near future, we should expect Dubai developers to offer more advanced off-plan payment plans to make it easier for the buyer to pay off the installment plan, rather than relying on a mortgage. It is likely that developers will also reduce the initial payment to a minimum.

Sales of residential properties under construction in Dubai are growing- Dubai real estate market

Property rental income continues to attract more and more new buyers. Opportunities for investment in off-plan housing are now generating “generational interest,” with rental income recording the sharpest increase since 2014.

The market offers the highest possible rental income if you are an investor. The average rent of an apartment in Dubai increased by 4% compared to the fourth quarter of 2021, according to a recent study by analyst firm Chestertons.

Interestingly, high ROI is no longer limited to downtown areas such as Downtown or Dubai Marina, and is now extended to vibrant suburban areas such as:

  • Sports City, 
  • Jumeirah Village Circle, 
  • Arjan, Arabian Ranches 
  • and Al Barsha South.

“Dubai’s reputation as a major business hub, its competitive property prices, high rental incomes and expanded residential opportunities make the emirate an ideal destination for new home buyers,” the study said.

In the OAE, unlike other countries, investors can benefit from the competitive price of real estate in the stage. Let us compare: the price per square meter in Dubai averages USD 5,500 versus USD 11,000 in Paris or Sydney. In addition, the local off-plan market is experiencing a period of growth, with sales of off-plan apartments in the city totaling AED 11.65 billion (USD 3.17 billion) in 5,303 transactions in the fourth quarter of 2021, compared to AED 9.79 billion (USD 2.64 billion) for 4,905 transactions in the third quarter of 2021.

Real estate agency in Dubai

Do you want to buy property in Dubai? Contact the specialists of the Ax Capital agency, who will help you get to know the city, talking about its key features. They will help you find the best properties that are suitable for both permanent residence and rental income.


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