Dubai’s Real Estate Market Defies Expectations, Continues to Soar

Dubai’s red-hot real estate market is defying predictions of a slowdown, suggesting that the Middle Eastern business hub might be breaking free from its traditional boom-and-bust cycles.

“Prices are continuing to rise, and the transient nature of Dubai seems to be well and truly over,” said Taimur Khan, head of research at global property advisory firm CBRE Group Inc. “Whether new or long-standing residents, most are buying for occupancy now, and as a result, we’re seeing prices remain resilient.”

Many analysts had anticipated a moderation or even a drop in property prices and rents by early 2024. However, these predictions have not materialized, despite ongoing tensions from the Israel-Hamas war, rising cost of living, and the city’s waning appeal for wealthy Russians.

Instead, home values have risen for 15 consecutive quarters, up 20% for the year ending May, according to Cushman & Wakefield Core. Rents have climbed for 13 straight quarters, albeit at a slightly slower pace than the previous year.

“Demand is coming from everywhere, even though the Russian buyers have declined in the market,” said Prathyusha Gurrapu, head of research and advisory at the real estate consultancy firm. “Prices in most areas have now surpassed their 2014 peaks and are still growing as buyers keep coming from Europe, India, and other South Asian countries.”

In 2023, Dubai saw a record 274 billion dirhams ($74.6 billion) worth of property transactions, with 89.2 billion dirhams recorded in the first three months of this year alone. City-wide prices have surged 60% since the end of 2020, while rents have soared by 83%. This growth has been driven by an influx of wealthy investors, including Russians, crypto millionaires, and affluent Indians seeking second homes. The government’s effective handling of the pandemic and liberal visa policies have also attracted more foreign buyers.

Dubai’s property market, historically known for sharp booms and busts, has introduced reforms to limit volatility, such as raising required down payments for mortgages to 20%. This stability has led to a resurgence in luxury projects, including developments on artificial islands like Palm Jebel Ali.

However, the rising cost of living is a concern for policymakers aiming to keep Dubai competitive for global companies. The emirate was ranked the 15th most expensive city globally for expatriates in Mercer’s 2024 Cost of Living report. Developers built around 40,000 homes last year and expect to complete an additional 39,000 in 2024, with Knight Frank projecting around 260,000 new homes by 2029.

Despite the influx of new supply, the market has absorbed it due to a growing population, which Dubai officials expect to reach 5.8 million by 2040, up from about 3.3 million in 2021. However, Gurrapu expects prices to moderate from next year through 2027 as more homes become available.

For now, affordability remains an issue, with many residents moving to cheaper locations or taking landlords to court over increasing rents. Much of the new sales are in the “off-plan market,” where developers sell homes ahead of construction with installment payments, offering a cheaper alternative to established locations.

Developers are confident, launching projects rapidly and collecting payments faster than ever. Emaar Properties PJSC, Dubai’s largest developer, requires buyers to pay the final 15% of the property’s value before handing over the keys.

“I truly thought the market would moderate by now considering the massive increases over the past few years,” said CBRE’s Khan. “But now, as I look at the dynamics, I’m starting to believe that we’re unlikely to see much of a drop in the near future.”