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Dubai’s real estate market witnessed a 44% increase in transactions as property prices and rents continued to rise

The growth in the real estate sector was primarily driven by a 42.6% increase in off-plan sales and an 11.3% rise in secondary market sales, according to CBRE’s monthly report

Dubai’s real estate market witnessed a 44% increase in transactions as property prices and rents continued to rise

Dubai’s residential market is experiencing strong demand, as seen in a record-high total volume of transactions in May 2024 at 15,766, a 44.2% increase from the previous year. Secondary market transactions rose by 5.7% to 5,065, while off-plan properties surged by 74.3% to 10,701. Year-to-date sales reached 62,180, up 384.3% from 2019 and 30.0% higher than in 2023. This growth was primarily driven by a 42.6% increase in off-plan sales and an 11.3% rise in secondary market sales, according to CBRE’s monthly report.

Are people moving to the suburbs?

There has been a noticeable change in market trends in Dubai’s real estate sector from 2019 to the present day. Previously, most sales were focused in the city’s core and prime residential areas, near central business districts (CBDs) and leisure destinations. However, recent data shows buyers are now moving away from these established locations due to limited supply and higher costs. This shift is primarily driven by market conditions and the increased expense of purchasing property in these popular neighbourhoods.

Which price segment is finding favour among the buyers in Dubai?

In May 2024, there was a 19.3% decrease in the number of transactions priced below AED 1,000 per square foot compared to the same period the previous year. There were a total of 2,417 such transactions, making up 15.3% of May’s total sales volume.

Additionally, the core market saw a significant increase in transactions priced between AED 1,000 and AED 2,000 per square foot, with a 64.1% year-on-year growth totalling 8,247 transactions, accounting for 52.3% of total transactions. The upper-mid-end properties in the AED 2,000 to AED 3,000 per square foot bracket also experienced a surge, with a 154.0% increase in activity levels reaching 4,034 transactions, making up 25.6% of the total residential transactions.

In the higher-end segment of the market, there is a shortage of available properties in prime and super-prime areas, which is affecting sales activity. Properties priced between AED 3,000 and AED 8,000 per square foot saw a 19.5% drop in transactions compared to the previous year. Sales of properties priced at AED 8,000 per square foot and above only accounted for 0.2% of total sales in May 2024, indicating limited demand and availability in this segment.

Rents are rising steadily

The number of rental registrations in Dubai increased by 5.9% in the year to May 2024, reaching a total of 255,178. This growth was driven by a 12.2% increase in renewed rental registrations, while new contracts registered declined by 3.7%. According to the report, tenants are choosing to renew due to high rental growth in some areas, impacting affordability in certain typologies and neighbourhoods.

“Average residential rents in Dubai saw a 21.1% increase in the year to May 2024, driven by a 22.2% rise in apartment rents and a 13.1% increase in villa rents. The average apartment rent is now AED 126,598 per annum, while the average villa rent is AED 352,572 per annum. Palm Jumeirah and Al Barari have the highest annual rents for apartments and villas, respectively. The strong demand in prime areas has caused rent increases in secondary communities as well. Rental rates are expected to continue increasing, although not as rapidly as before,” explains Taimur Khan, Head of Research for Middle East at CBRE.

Price growth to stay robust through the latter half of 2024

Residential prices saw a 20.1% year-on-year increase, slightly lower than the previous month’s 20.7% growth. Average apartment prices rose by 19.8% to AED 1,530 per square foot, while average villa prices increased by 21.8% to AED 1,847 per square foot. Palm Jumeirah stood out as the area with the highest sales rates, with average prices reaching AED 2,804 per square foot for apartments and AED 5,228 per square foot for villas.

“The influx of new property launches in Dubai has raised concerns about oversupply and potential price decreases. However, data shows that over 70% of units launched since 2022 have already been sold, with even higher rates in established residential areas. Demand for off-plan properties is largely driven by owner-occupiers, which is expected to provide relief to the rental market in the long term. However, sales prices are unlikely to be significantly affected by the increase in supply. Overall, price performance is expected to remain strong over the upcoming period in both the apartment and villa segments of the market, although the market seems to be finding some stability,” concludes Khan.