Continued demand in Dubai’s real estate sector has propelled home prices upwards, with Knight Frank’s recent findings showing a 4.8% Q2 2023 increase and a 17% surge over a year. Apartment prices have risen 21% since January 2020, averaging AED 1,290 per square foot. Meanwhile, sought-after villa prices surged by 51%, reaching AED 1,520 per square foot. This sustained momentum points to ongoing pressure on prices due to population growth. The sector’s vitality is underscored by 76,119 transactions worth 283 billion dirhams ($77 billion) in H1 2023, aided by the coveted Golden Visa boosting foreign investor demand.
Dubai’s housing market might experience a shortage in the future due to anticipated population growth, which is driving the requirement for increased real estate development. A projection by real estate advisory firm Knight Frank suggests that factors like the recently introduced Dubai Economic Agenda ‘D33,’ aiming to double the emirate’s GDP by 2033, will lead to a demand for more human resources.
With the population predicted to reach around six million by then, compared to the current 3.5 million, the Dubai Urban Master Plan 2040 envisions a subsequent rise to 7.8 million a few years later. This expected population surge will necessitate a significant expansion in residential developments. In fact, the existing housing capacity in the city will need to nearly double to achieve these population goals.
Regarding the projected housing shortage in the long run, the indications are already emerging. For instance, Dubai’s GDP expanded by 2.8% in the twelve months leading up to Q1. Key sectors like retail, trade, aviation, and hospitality have maintained their dominance, resulting in Dubai achieving the distinction of having the world’s highest average hotel occupancy levels during H1, reaching 78% across its nearly 150,000 rooms. Moreover, the non-oil sector PMI in the emirate has remained in expansion mode for more than two and a half years He added that due to active business recruitment and expansion, there is currently a scarcity of Grade A office space.
While the supply is already limited in prime areas of Dubai, experts note that the construction of new homes in the rest of the city is still increasing. By the conclusion of 2028, Knight Frank predicts the delivery of 85,200 homes, of which 69% will be apartments (about 59,000 units). Around 40,000 homes are expected to be finished this year, although some might face delays to the following year. Excluding 2023 and assuming the punctual completion of all 40,000 homes projected for this year, around 42,500 units are set to be completed between 2024 and 2028. This translates to an average of approximately 8,500 homes per year.
As per data released by the Dubai Land Department, the real estate sector in the emirate witnessed 76,119 transactions amounting to 283 billion dirhams ($77 billion) in the first half of the year. The highly sought-after Golden Visa has additionally contributed to increased demand among foreign investors.
The most recent findings from Knight Frank indicate that continuous and persistent demand has resulted in a rise in home prices throughout Dubai. The real estate sector observed a 4.8% escalation in the second quarter of 2023 compared to the first quarter, and over the course of 12 months, there was a notable 17% surge.
The data reveals that apartment prices have seen an increase of 21% since January 2020 and currently stand at an average of AED 1,290 per square foot. Similarly, villa prices, which remain in high demand, have demonstrated an even more substantial growth of 51% over the same period, with an average current price of AED 1,520 per square foot.
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