The rising trajectory of the Dubai luxury real estate market shows no signs of slowing down, and the booming trend will likely continue in 2023.
Record-breaking property deals are being agreed on a near-fortnightly basis in the city. Earlier in February, an eight bedroom villa was purchased in the Tilal Al Ghaf development for $24.6 million (AED90.5 million). The transaction is a record for the most expensive deal in the neighborhood.
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News of the sale came days after an apartment in Dubai’s Bulgari Resort and Residences on Jumeirah Bay Island sold for $11.7 million (AED42.9 million). The sale’s rate of $3,687 (AED13,543) a square-foot (sq.ft) was a record for per sq.ft rates in Dubai.
The transaction came days after a 38,970 sq.ft apartment in Bulgari Lighthouse sold for $112 million (AED410 million).
The deal made the nine-bedroom unit the most expensive apartment in Dubai. However, its price per sq.ft (about $2,870) was lower than the Bulgari Resort and Residences unit’s.
Developers eye opportunity
Developers in the city are fine-tuning new launches to ensure they can capitalize on the resurgent appetite for luxury real estate.
In January, Danube Properties launched the Viewz twin-tower project. The $381 million (AED1.4bn) project will feature Aston Martin furnished interior common areas and amenities. Viewz’ two- and three-bedroom apartments and ‘sky villas’ planned will also have private swimming pools.
Damac Properties also launched Damac Bay by Cavalli in January. The luxury brand will feature in the 42-floor, three-tower property.
Dubai Marina, Jumeirah Beach Residence, Bluewaters, and Palm Jumeirah remain attractive areas for property owners, according to Nikita Kuznetsov, chief executive of Metropolitan Premium Properties.
Villas and luxury properties are likely to be in very high demand amid limited supply in the segment, Kuznetsov said according to local media.
Dubai luxury real estate demand
Prices in prime Dubai real estate zones such as Palm Jumeirah and Jumeirah Bay Island grew by 29 percent in Q3 2022. Ultra-high net-worth investor (UHNWI) demand and sustained low levels of luxury stock contributed to the growth.
Construction occurring at a slower rate than demand growth is partly contributing to higher luxury real estate demand. According to Knight Frank’s data, there are 81,000 units due by end-2025, but “just eight new villas are due in Dubai’s prime residential areas between 2023 and 2025”.
The consultancy says there is a luxury home “drought” in Dubai with developers “not delivering new projects at a faster rate”.
These factors raise questions about the medium- to long-term sustainability of the luxury real estate boom.
The question is made more pertinent given prevailing inflationary pressures on the supply chain. Price hikes for materials such as copper and nickel have been impacted by the ongoing war between Russia and Ukraine. This is a key consideration for contractors and developers whose projects require material imports from these markets.
Despite these challenges, the outlook is positive for luxury real estate in Dubai.
UHNWIs will continue seeking a greater share in the segment. Business and visa initiatives, too, will attract a new wave of first- and second-home purchases.
There is also the added attraction of mortgage rates becoming more favorable compared to rental hikes in recent months. For end-users in the city, affordable mortgages to eventually own property are gradually becoming more attractive than paying rents tied to market fluctuations.
“Tenants were faced in 2022 with the new market reality of having to pay up to 50 percent higher rents,” said Mohamad Kaswani, managing director of Mortgage Finder.
“Renters found themselves under pressure as many were served [with] an eviction notice by their landlords to sell their property. Those who had the means to make a down payment rushed to take advantage of interest rates remaining sub 5 percent throughout 2022 to secure a mortgage and buy a property.”