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Dubai set for its strongest forecasted growth in 2024: Savills

Here’s why Dubai is the leading global city for prime residential properties, with capital values increasing by 17.4%

Dubai and Sydney: The rising stars of growth in 2024

According to the Savills Prime Residential World Cities Index, Dubai remains the hottest market for prime residential properties. The capital values in Dubai have increased by a significant 17.4% for the year, and a more modest 5.6% in the second half of 2023. In comparison, the average price growth across 30 global cities covered in the index is only 2.2%.

Despite being a prime market, Dubai is still competitively priced by global standards, with an average cost of $850 per square foot. It also offers a comparatively low cost of living, an easy visa process, and a warmer climate, which makes it highly attractive to both international and domestic buyers, as noted by Savills researchers.

While Dubai leads the prime property market, other cities in the Asia Pacific region have shown remarkable capital value growth in 2023, with Mumbai leading the pack.

The report observes that some cities experienced more significant economic turbulence than others, particularly during the second half of 2023.

New York and San Francisco, with the former seeing a muted return to office and the latter still weathering tech turbulence, recorded some declines for the full year.

Hong Kong’s ongoing political and economic uncertainty continued to hamper its prime residential markets, with capital values falling 3.7 per cent over the year.

Looking ahead into 2024, capital values for global cities will remain in positive territory, the report showed.

Prime residential price growth of a modest 0.6 per cent is forecast across the 30 global cities monitored, down from the 2.2 per cent achieved in 2023.

“In the face of ongoing economic uncertainty and a higher interest rate environment, prime residential markets in world cities were muted in 2023 following two years of significant gains. Growth is forecast to slow further in 2024 as markets return to more normal conditions, but will broadly remain in positive territory,” says Kelcie Sellers, associate, Savills World Research.

Sydney or Dubai: Who will outshine the other?

Sydney and Dubai are forecast to be the two top performers for the year ahead, with both cities set to benefit from increases in their high-net-worth populations.

Sydney is seeing high levels of demand for quality prime homes, but supply remains low. This imbalance will likely persist through 2024 and push up prices, which are forecast to increase by 8-9.9 per cent.

Dubai increased by a significant 17.4 per cent over the year, but this rate of growth will likely slow this year as it returns to more normal activity.

Savills anticipates prices to grow in the emirate by a further 4-5.9 per cent.

Suffering from weaker sentiment associated with higher interest rates and the challenging economic backdrop, the prime residential markets of Los Angeles, New York, San Francisco, Seoul, London, Singapore, and Hong Kong are all forecast to see price falls this year.

Sellers says, “We expect it to be a year to watch the markets globally. Countries that account for approximately 40 per cent of the global population will go to the polls this year, and housing will likely be front of mind for many voters and policymakers alike. The potential for central banks to also cut interest rates during mid to late 2024 may also boost activity across prime property markets and could surprise on the upside for pricing in the latter part of the year.”

Who takes the lead in rental performance and yield?

Dubai also recorded rental price increases during the year at a little under 10 per cent, versus the average 5.1 per cent recorded among other global cities in the Savills index.

Lisbon led prime rental growth among the 30 cities in the index, increasing 39 per cent last year.

In terms of yields, Dubai stands out as a high-yielding city by world city standards, with returns of 4.8 per cent.

Across all world cities, prime gross yields stood at 3.1 per cent as global rental markets recorded stronger growth than the sales markets.

The cost of buying, holding, and selling a property in Dubai is also among the lowest, at less than 10 per cent of the property purchase price, versus 15 per cent, on average, across the 30 global cities.