The COVID-19 pandemic affected the world in ways we were unprepared for. The virus spread around the world quickly and brought the world’s major economic sectors to a halt in early 2020. It affected the real estate sector the most, causing property prices to plummet as demand dwindled but supplies grew tremendously. The Dubai property market experienced unprecedented lows in 2020, with the entire market entering a prolonged period of stagnation.
A majority of financial analysts were of the view that the city would at least take a decade to return to its pre-pandemic property price levels. On the contrary, it hardly took two years for the Dubai property sector to make a strong comeback and mark the start of the city’s third residential market cycle. The quick and positive undertone of the Dubai property market is unlike anything that was not there in the previous cycles, even though there is a threat of oversupply in the market.
The phenomenal speed of the turnaround in the Dubai property market has left property experts asking whether this is the start of another “bubble” or the market is showing price resilience, which will lead to pre-pandemic normal levels. Let’s have a look at the data and observe what does it prove?
A new market cycle
According to the Dubai Land Department’s statistics, Dubai real estate market recorded more than 53,000 new property transactions, worth AED114.2 bn., which is far more than the combined total of 2019 and 2020, combined. Owing to the number of transactions and the value of property deals, 2021 can easily be tagged as a “record-breaking year” for the Dubai property market.
The average residential property prices were roughly increased by 9 per cent – the quickest since 2015. If we further analyse the performance based on the given data, it can be seen that the average price growth for apartments in Dubai was around 7 per cent, while the villas experienced average price growth of 21 per cent. The villas were in more demand due to the need for more space notion, fuelled by the global pandemic.
Not just locals and expatriates but high net worth individuals from developed countries also targeted high-end villas in prime areas of Dubai. Major credit goes to the effective handling of the global pandemic, successful vaccine roll-out, and new reforms introduced by the UAE government.
Premium properties are in higher demand
If Dubai property market is analyzed on sub-market levels, the prime property market remained the most active and in limelight throughout the pandemic. Al Barari remained the most popular area to buy high-end villas in Dubai. Premium houses prices in 2021 alone climbed to double-digit value in prime areas such as Jumeirah Bay Island and areas like Dubai Emirates Hills and The Palm Jumeirah, the increase was more than 50 per cent.
According to a report, prime property prices in Dubai grew by an average of 44 per cent in the last 12 months, starting from October 2020. It is the quickest raise compared with the prime property price increase experienced in Q3, 2017, when the prime property values rose by 57.3 per cent.
The property market is expected to remain buoyant throughout the remainder of 2022 and years to come, with brisk sales predicted for prime, high-end homes in some of the emirate’s stand-out developments. The villas have outperformed apartments during the third cycle. Since the peak in 2009, the villas have been the star performer of the Dubai property market, with US$10 million plus record levels of sales.
In 2021 alone, 93 villas and high-end houses were sold for more than US$ 10 million. The previous historic high of 31 was set in 2015. The majority of these properties are sold to foreign high-net-worth individuals. Though the US$ 10m+ home sales now account for 4.2% of all transactions in the city by value but the demand for luxury and ultra-luxury homes continue to grows, while the supply in this section is limited.
Why do high-net-worth individuals get attracted to high-end properties in Dubai?
The above-mentioned statistics reveal that the Dubai real estate sector is one of the most favourite and popular investment segments for high-net-worth individuals across the globe. However, the question arises what makes Dubai so charming for them? And the reasons are obvious, such as:
- The UAE is one of the world’s most vaccinated nations – with 95 per cent of the total population have already received two vaccination shots. This single factor had tremendously boosted the market sentiment. The majority of investors feel safe being in this country; thus most of them now buy property here not just for the sake of capital appreciation but to live here. And the way, the UAE government has handled the COVID-19 induced pandemic along with opening Expo 2020 is worth commendable.
- The UAE government has not just handled the pandemic effectively but it is one of the first countries that reopened its borders, after a single lock-down. It sent a strong message to the international community and resultantly, there was an influx of tourists including potential investors. It is not wrong that several record-breaking deals were recorded since the start of the pandemic and soon after the brief period of lock-down in the country.
- It may be a surprising factor for most potential investors that the luxury residential segment is relatively affordable, as compared to the established markets including London, Miami, and New York.
- The last but not the least important factor was the introduction of new reforms including the Golden Visa options and new business rules, where the foreign entrepreneurs will no longer need an Emirati sponsor for business activities.
Together these amendments are helping Dubai to transform into a global city, in the truest sense. Rapid property developments, new infrastructure, cultural attractions, and smart business initiatives are transforming the region. Now you can find out what it’s like to live and invest in the United Arab Emirates’ largest city, as compared to other global cities that could not grapple with the global pandemic.