Dubai’s real estate sector enjoyed record-breaking success in 2023, marked by a remarkable surge in both sales volume and property prices. In this analysis, we will dig deeper into the performance of Dubai’s real estate market, offer insights into key performance indicators, highlight the top 5 locations in terms of real estate activity, and finally, dive into the outlook for 2024.
Dubai, in particular, reported a staggering 114,400 unit sales for apartments and villas combined, representing a notable 44% increase compared to 2022 figures. The median prices for apartments in Dubai reached nearly AED 1,800 per square foot in 2023, reflecting a substantial year-on-year growth of 25%. When factoring in the robust 34% growth achieved in 2022, the cumulative property returns over the past two years have reached an impressive 67%. The villa segment in Dubai experienced even more pronounced growth in 2023, with the median price per square foot hitting AED 1,110 and a year-on-year growth of 37%.
Key Drivers of Dubai’s real estate performance
For a country where expats account for more than 85% of its residents, the sustained demand for Dubai real estate stems from international buyers drawn to the city’s investor-friendly reputation, a tax-free property regime, and a currency peg with the US Dollar that provides a hedge against currency depreciation, especially for emerging market investors.
Examining the trajectory of Dubai’s real estate performance since 2020 reveals important drivers shaping the market.
From 2014 to 2020, the market exhibited cyclical trends with intermittent peaks and corrections, resulting in overall stagnation. The COVID-19 pandemic in 2020 significantly impacted the global economy and Dubai’s real estate sector. Lockdowns, travel restrictions, and economic uncertainties led to a slowdown in property transactions and a decline in demand.
In response to adverse market conditions, the Dubai government implemented various measures in 2020, including incentives, rental relief, administrative fee waivers, and deferred payment plans, to bolster the real estate sector. The pivotal turning point came in 2021 when global efforts to combat the pandemic, vaccine rollouts, and economic improvements influenced the recovery trajectory of Dubai’s real estate market. While many major cities faced prolonged lockdowns or severe infection waves, Dubai’s swift response allowed it to reopen for business quickly, gaining a competitive advantage.
Introduction of the Residency Visa and UAE Golden Visa for property investors
A critical factor contributing to the resilience of the UAE real estate market, particularly in Dubai, is the introduction of the Residency Visa or the UAE Golden Visa for property investors. In 2021, the minimum property investment required to qualify for a 3-year residency visa was reduced to AED 750k from AED 1mn. Subsequently, in April 2022, the UAE Golden Visa investment threshold was further lowered to AED 2mn from the initial AED 10mn, allowing investors to obtain a 10-year residency without requiring a local sponsor.
Given the geopolitical dynamics from 2022, Dubai has increasingly emerged as a safe haven for regions facing conflicts, leading to increased demand from countries such as Russia and Ukraine. In conclusion, Dubai’s appeal to international buyers, its strategic response to market challenges, coupled with the introduction of the Residency and Golden Visa schemes, has positioned Dubai as a robust and attractive destination. As global political developments unfold, the city’s status as a haven further augur well for sustained real estate demand, making Dubai a compelling choice for investors worldwide.
Distribution of Property Sales during 2023
On average, off-plan property sales accounted for nearly 55-60% of the monthly property sales in 2023. Although the off-plan prices can potentially be priced higher than ready projects, investors still tend to prefer under construction projects given the flexible payment terms and other incentives provided by the developers.
Apartment sales constitute 99.3k units in 2023, while villas account for 15.2k units, with the remaining portion being commercial properties.
Top 5 property investment locations in Dubai for 2022-2023
Exploring the most promising property investment hubs in Dubai for 2022-2023, we shed light on the top 5 locations based on investment activity and price per square foot.
While Business Bay led in sales in 2022 with 9.3k units, Jumeirah Village Circle (JVC) stole the spotlight in 2023, boasting a remarkable 13.6k units sold—more than double its 2022 figure. Dubai Marina, a perennial favorite, secured its place on the coveted list with nearly 9.8k units sold in 2023, a robust growth of 29% over 2022.
In terms of property prices, Dubai Marina surged ahead in 2023, reaching a median price per square foot of AED 2,731—a year-on-year growth of almost 38%. Remarkably, apartments in Dubai Marina now even tend to be more expensive than Downtown Dubai. Business Bay maintained its robust pricing, with median prices touching AED 1,921 per sq ft in 2023, marking a growth of nearly 18% from 2022.
Jumeriah Village Circle remains one of the most affordable locations among the top 5 property investment locations of Dubai in 2023. Despite a surge in demand and a substantial increase in units sold, JVC observed a median price appreciation of approximately 15%, with prices averaging AED 1,032 per square foot in 2023.
Downtown Dubai exhibited stability in prices throughout 2023, maintaining a median price per square foot of AED 2,285, compared to AED 2,193 in 2022. Rounding off the list, Dubai Creek Harbour claimed the 5th spot with nearly 4.7k apartments sold in 2023—a 29% increase from 2022. The median property prices in Dubai Creek Harbour also experienced a notable rally, rising by almost 13% in 2023 to reach AED 2,011 per square foot.
Assessing the Rental Yield in the Top 5 investment locations
To scrutinize the rental trends in the prime investment areas of Dubai, we analyzed median annual rental value and prices of 1 Bed apartments. 1-Bed apartments constitute nearly 51% of all registered rental transactions in Dubai in 2023.
Dubai Creek Harbour witnessed the most substantial percentage growth in annual rental value in 2023. Renting a 1-bed apartment in this area would cost around AED 78k, marking an impressive 42% increase compared to 2022 values. At current rates, this equates to a gross yield ranging between 5 to 6%.
Downtown Dubai too experienced a noteworthy surge in the median annual rental value for 1-bed apartments, escalating by 36% to reach AED 109k in 2023. The prevailing market rates suggest an anticipated gross yield of 5 to 6%.
While the overall average rental values for 1-bed apartments across Dubai increased by approximately 20% in 2023, Dubai Marina’s rise was relatively less pronounced, compared to its price appreciation. The median rental for a 1-bed apartment in this area in 2023 amounted to AED 85.5k, reflecting a 22% increase over 2022. In terms of rental yields, this translates to a range of 3 to 4%, based on median rental values transacted in 2023 according to DXBInteract and DLD data.
Business Bay saw a 15% growth in the median rental value for 1-bed apartments, amounting to around AED 72.5k in 2023. This corresponds to a yield range of 4.5% to 5.5%.
Summing up our analysis, JVC potentially offers the highest gross rental yield among these locations, within a range of 5.5% to 6.5%. The median rental value for a 1-bed apartment in JVC in 2023 is approximately AED 50k.
Dubai Real Estate – 2024 outlook
Dubai continues to deliver as an investor-friendly jurisdiction. Although the UAE has introduced Corporate Taxation regime from June 2023, there is no individual taxation of salary income. Similarly, individual investors are not subject to taxes on rental income from property or capital gains in the UAE. The rising popularity of resident and Golden visas for property investors, coupled with the pro-longed Russia-Ukraine confrontation, contributes to a favorable outlook for Dubai’s real estate market in 2024.
Infrastructure Developments in Dubai
Furthermore, additional growth impetus is anticipated from the new infrastructure projects under execution in Dubai. This includes extension of the Dubai Metro, especially the Blue Line, which will run parallel to the existing red line. Once fully functional, this will improve connectivity to the already in-demand locations of Jumeirah Village Circle, Jumeirah Village Triangle (JVT) and Al Barsha. Another pivotal infrastructure project is the proposed expansion of the Al-Maktoum International airport, also known as Dubai World Central (DWC). The airport is expected to play a larger role in handing passenger traffic in 2030s. These initiatives stand to directly benefit emerging areas like Dubai South, centered around Expo 2020, as well as JVT and JVC.
Contact us to know more about Dubai’s top selling real estate projects of 2023, and 2024, or for information on applying for Residency Visa via property investment.
Source: We thank DXBInteract.com and DLD for making available the data required for this analysis. If you come across any discrepancies or encounter any concerns, please don’t hesitate to report them to us at info@mygoldenpass.com