1880 S Dairy Ashford Rd, Suite 650, Houston, TX 77077

Dubai real estate market analysis for Q4 2022

The Dubai property market is on track for a strong end-of-year performance in 2022, having recorded steady and consistent growth in the third quarter due to strong demand from investors and end-users.

According to the most recent Zoom Property Insights data, the market experienced a nearly 14% quarter-on-quarter increase in sales volume during the third quarter, with 22,423 real estate transactions recorded in the second quarter increasing to 25,496 in Q3.

Similarly, there was a significant increase in the value of transactions, which increased by nearly 18% in Q3, from Dh58.99 billion to Dh69.49 billion. The same growth pattern is expected to repeat in the fourth quarter, as the market attracts more HNWIs and foreign investments.

Current Market Situation 2022

The rental market is expanding, with more than 60% of new rental agreements. From April through June 2022, 124,000 leasing agreements were signed, with 60% being new contracts and 40% being renewals.

In the second quarter, the property rental price index was 0.968, and the index price was AED 52,133 per year. The index price for apartments in Dubai are AED 47,764, whereas AED 133,085 ($47,764) for villas and townhouses.

In June 2022, the most popular areas for Dubai rentals are Jebel Ali, which had 1423 contracts signed, Al Warsan, which had 1311 contracts signed, Al Barsha South, which had 1250 contracts signed, Marsa Dubai, which had 1202 contracts signed, and Business Bay, which had 1148 contracts signed.

June 2022 recorded the largest number of purchases and sales since 2012. A total of 8.8 thousand purchase and sale transactions worth AED 22.75 billion were recorded. This is the largest number of purchases and sales in June since 2012. In the secondary market, 60% of all registered sales transactions were for the purchase of real estate.

Changing Consumer Demand

While the market remains strong, there has been a shift in demand among homebuyers. According to Zoom Property Insights, they are more interested in off-plan properties, which increased by nearly 31% compared to the previous quarter.

Despite a higher number of transactions, ready properties saw a marginal growth of 2.2%, down from 19.2% and 12.6% in the first and second quarters, respectively. This reflects changing market trends and sets the stage for a strong fourth quarter, with off-plan properties dominating sales transactions.

Q4 Prospects

In September 2022, Dubai real estate broke a nine-year record with 8,649 transactions worth Dh24.42 billion. Despite global challenges, it increased by 13.34% month on month, according to The Zoom Property Insights.

“This demonstrates that the outlook for Q4 is positive, and the market is well-positioned to finish the year on a high note.” “A greater influx of foreign investors is expected to enter the market, which will boost sales even more,” Shobeiry said.

Significant Contributing Factors

Due to its investor-friendly policies, Dubai has maintained its position as a preferred choice for foreign investors. According to Zoom Property Insights, the reformed visa policies and relaxed rules have also contributed to the phenomenal growth of Dubai real estate.

“The phenomenal success of Dubai real estate is the result of a number of factors. The government, on the other hand, deserves credit for always looking out for the interests of foreign investors and property buyers. “I anticipate more expat and investor-friendly policies in the future, which will encourage more people to invest in the Dubai property market,” Shobeiry concluded.

Other Contributing Factors

The significant increase in off-plan property sales, along with a major slowdown in existing property sales, is symptomatic of how market circumstances have evolved during the course of 2022. Interest rates have increased to their highest levels in over a decade, and direct payment to property developers has become a far more appealing possibility, as purchasing real estate under development is often less expensive.

Given the dirham’s peg to the dollar, the UAE central bank follows the Federal Reserve’s policy rates, and with inflation in the US remaining high (8.3% y/y in August), the Fed is unlikely to ease monetary policy. We expect the Fed Funds target rate (upper bound) to rise further into 2023, peaking at 4.75% around the midpoint before declining later in the year.

The USD has also risen significantly as a result of these hikes, reaching a two-decade high in September, making Dubai substantially more expensive, particularly for international investors, influencing supply and demand. Ultimately, these trends will raise buyer expenses in the future, potentially extending the current purchase pattern into the next year.

Highlighting Factors that Contribute to Real Estate Growth in Dubai

Due to the government’s multiple initiatives to assist the real estate market, many professionals from all over the world are eager to invest in Dubai real estate, either for work or as long-term residences. Recent changes to golden residence permits for real estate investors have made it easier for them to obtain the visa. Real estate investors can now apply for the golden residency visa if they buy a home for less than AED 2 million, as opposed to AED 5 million previously.

Investors are also eligible for such a visa if they purchase a home with a loan from a specified local bank. In addition, investors can obtain Golden Residence by purchasing one or more off-plan properties from an approved local real estate company for at least AED 2 million.

With regards to the luxury home market, Zoom Property Insights stated that Dubai’s luxury home market will also continue to see high demand in 2022, supported by rising interest from international investors. The remarkable growth of the market is driven by visa reforms, expat-friendly policies, and high profit-earning potential, making Dubai one of the most advantageous real estate markets in the world.

Property Price Growth in 2022

Property price growth has moderated after reaching y/y highs in 2021. Villa and apartment price increases decreased to 24.6% and 19.0% year on year, respectively. On a year-over-year basis, the average rent for apartments surpassed the average rent for villas in Q3 (22.6% y/y vs. 22.1% y/y), driven almost exclusively by the average rent for three-bedroom apartments, which has more than doubled since the second quarter.

Rent costs are expected to rise even more in the last quarter of the year as a result of the FIFA World Cup in Qatar, which begins in November and will bring a massive influx of people to the region, and Dubai in particular, due to its role as a regional hub.

Dubai has proven to be a desirable place for property investors in 2022. The overall number of transactions recorded this year, 71,278, has already surpassed the total number of transactions recorded in 2021, 60,347 (an increase of 18.1%). As of this writing, the total value of these transactions has increased by 28.7% (AED 191.92 billion from AED 149.16 billion), demonstrating a significant increase with the remainder of the year yet ahead.

Due to these reasons, it is a wise investment to buy apartments in Dubai. Dubai is a hot market for property investments, with the entire city brimming with luxury apartments and a spike in property prices. The strong return on investment is also an encouraging factor for investors. You can look through an extensive selection of Dubai real estate at Next Level Real Estate. The skilled team of agents can assist you buy apartments in Dubai that will provide you with the maximum returns based on your preferences.