Property prices have surged in Dubai, fuelled by intense demand for a variety of reasons. The author of this article examines the state of the market, and what the future holds.
The following article about the Dubai real estate market comes from Christian Atzert. Atzert has been engaged in the Dubai property market since 2005 as an independent consultant, advising institutional and private clients on asset acquisitions, legal structuring as well as property management matters. He heads Dubai-based PPP Advisors.
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Property prices in the Dubai market have increased substantially over the last three years, prompting some commentators to frivolously announce the onset of a new bubble.
However, a spectacular GDP growth of 7.6 per cent in 2022 paired with continued significant inflows of people and investment capital may lead to other conclusions.
This article therefore aims to put the current market metrics into a broader perspective and present an outlook on the long-term developments, specifically in light of Dubai`s goals announced under the D33 development strategy.
Relief rally followed sell-off
Firstly, it is noteworthy that the present property cycle has started out from an extremely low baseline, following six years of gradually receding valuations, further exacerbated by a panic sell-off at the onset of Covid-19.
Intense demand for prime property has pushed prices in the luxury segment upward by 112 per cent since January 2020. While this may seem alarming at first glance, Dubai`s prime residential property is far from expensive compared with its peers.
According to Knight Frank et al, Dubai is the 16th most affordable luxury market in the world at present. Dubai prime residential properties cost an average of $9.470 per square metre, only around a third of the prices demanded in London, New York or Singapore.
Plan D33 – Dubai`s quest to rise to the
Plan D33, a Dubai government roadmap and economic plan recently unveiled is geared at – inter alia – establishing Dubai within the top four of the world`s leading financial hubs (presently number 22) alongside London, New York and Singapore by the year 2033.
Besides aiming to become a top dog in financial centres, Plan D33
entails further targets with respect to Dubai`s economic
- increase foreign direct investment (FDI) to $16.3 billion per annum (+87 per cent);
- increase its foreign trade to $7 trillion (+80 per cent, decade on decade); and
- increase gross domestic product (GDP) by 36 per cent decade on decade.
While this undertaking may seem ambitious at first, Dubai has an impressive track record of achieving similar feats.
Top-tier banks, family offices, hedge funds and other big players within the financial realm are already setting up shop in Dubai, the continuation of which will inevitably further nourish the immigration of high-profile employees, entrepreneurs and investors catering to and feeding off the financial ecosystem.
PPP Advisors strongly believe that (luxury) property valuations in Dubai will – during the course of this process – further converge with those seen in other leading financial hubs.
Relative value compared with peer cities
Meanwhile, luxury property in Dubai is presently valued at 33 per cent less compared with such assets in Berlin, Germany`s capital which is already placed in the lower third of the ranking for the world`s most expensive cities.
Considering a shortage of prime residential property under construction in Dubai and a continued strong demand, the firm expects the upward trajectory to remain intact for the foreseeable future, albeit at a slower pace.
With prime waterfront properties such as Palm Jumeirah and Jumeirah Bay being limited, we see a trickling down/diversion of prime property demand into inland high-end communities such as Jumeirah Islands, Jumeirah Golf Estates, Tilal al Ghaf and Al Barari.
Common denominators amongst the former are modern, high-quality
apartments and villas with ample living spaces, top-notch
community services and infrastructure complemented by excellent