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Luxury real estate: The rise of high-end properties in the Middle East

Dubai leads the surge in luxury properties across the Middle East, driven by economic diversification, rising UHNWIs, and a shift towards experience-driven living

Luxury real estate: The rise of high-end properties in the Middle East

The Middle East, known for its luxury and splendour, is witnessing a surge in the development of high-end properties. From sprawling beachfront villas in Dubai to sky-high penthouses in Qatar, there is a wide range of residences that cater to a growing class of ultra-high-net-worth individuals (UHNWI) seeking a sophisticated and exclusive lifestyle with unparalleled amenities and bespoke experiences. This trend, raging unabated in the Emirates, is driven by several factors, and is rapidly transforming the real estate landscape of the region.

Economic diversification

Many Middle Eastern countries are actively diversifying their economies beyond oil dependence, which has led to significant growth in sectors such as tourism, finance, and technology, attracting international business interest. The region’s stable political environments, world-class infrastructure, and vibrant cultural ambience, make these customers potential buyers for high-end properties.

Dubai serves as a prime example of this economic diversification. The city’s transformation into a global hub for tourism, finance, and trade has lured a significant international business community.

Its tax-free status makes it a favoured investment destination compared to other global property markets. According to Deloitte, the residential market exhibited a striking upswing in 2023 with an increase of 18% year-on-year sales prices and a 26% hike in rentals fuelled by high demand for luxury second homes and Dubai’s rise as a global luxury hub.

Rising interest rates are a global concern, but Dubai’s property market stands out with its lack of property taxes, high rental yields, and affordable prices per square meter. These advantages, coupled with residency and golden visa programs, offer investors a secure and potentially lucrative opportunity compared to other markets. In 2023, sales of properties exceeding $10 million nearly doubled to a staggering $7.6 billion in the city. This trend continued in Q1 2024, with luxury home sales reaching $1.73 billion.

Numbers say it all

Statistics paint a clear picture of a thriving market. According to a report by Knight Frank, Dubai’s prime residential property prices soared by 89% year-on-year in 2023. This growth is particularly pronounced in coveted neighbourhoods like Palm Jumeirah and Emirates Hills, where villa prices have risen outstandingly since the onset of the pandemic. Villas in the prestigious Four Seasons Residences project, which sold for AED 40 million off-plan in 2021, are now commanding a price tag of AED 100 million, pronouncing the market’s strength.

Similarly, a recent Middle East business survey reported Dubai achieving a remarkable milestone – selling 335 luxury properties by July 2023, generating nearly $850 million in revenue showing trends of “ultra-luxury” buying and buyers, taking property sales to new highs.

The shifting sands of luxury

While opulent finishes and breathtaking views were once the hallmarks of Middle Eastern luxury real estate, today’s discerning buyers seek a more holistic experience. Some label it the “Millennial Millionaire Effect,” where younger HNWIs prioritise properties catering to their emotional well-being and offering a multi-generational living environment.

Technological advancements, tailored interior design, and personalised concierge services are increasingly sought-after features.

A diverse investor pool driving the demand

A significant factor in the real estate boom is the growing population of HNWIs within the Middle East itself.  By Knight Frank’s assessment, the Middle East is poised to witness a 36% increase in billionaires by 2026. And that’s not all, the ranks of dollar millionaires are expected to swell by 30% since 2020.

Furthermore, the Middle East is attracting a growing number of international investors seeking safe havens for their assets and idyllic second-home destinations. There has been a notable influx of wealthy individuals from various regions, including Russians seeking asset protection, bankers fleeing strict COVID-19 restrictions in Asia post the pandemic, and Indians seeking luxurious getaways. This international interest further strengthens the market’s momentum.

A sustainable and experience-driven future

As economies in the region continue to strengthen and investor confidence remains high, the demand for high-end properties is expected to rise further. However, several key trends will likely shape the market’s trajectory:

  • Focus on sustainability: Eco-conscious design and energy-efficient features will become increasingly important selling points, attracting environmentally responsible buyers.
  • Experience-driven living: Luxury developers will prioritise creating unique and personalised experiences for residents, offering curated services and amenities that cater to their specific needs.
  • Technological integration: Smart home technology and building automation systems will become standard inclusions, enhancing convenience and security.
  • Rise of branded residences: Partnerships between luxury brands and developers will create a new wave of branded residences, offering an exclusive and prestigious living environment.

A lucrative opportunity for investors

The Middle East’s luxury real estate boom presents a compelling opportunity for investors seeking high returns. UAE offers properties at a competitive price per square metre compared to other luxury markets. Affordability, coupled with the ease of obtaining residency and visa programs, further softens the deal for international investors. These factors not only offer attractive immigration options but also keep the tempo of growth in the market. Moreover, the banks preferably maintain standardised borrowing rates for ease of transaction.

However, success hinges on understanding the evolving preferences of buyers and aligning investment strategies with current trends. By focusing on properties that offer exceptional value, unparalleled amenities, and a commitment to sustainability and customised services, investors can capitalise on this dynamic market and contribute to shaping the future of luxury living in the region.