Dubai's property market is experiencing a significant surge in apartment values, marking the most substantial increase in nearly a decade. Apartment prices have recorded an average increase of 20 percent in the year leading up to August, outpacing the 17.3 percent price increase in single-family homes. This surge is part of a broader property rally in Dubai, driven by an influx of newcomers, government reforms, and increased demand for more affordable housing options. Dubai's real estate market is rebounding following a seven-year downturn, with apartment prices still below their 2014 peak but showing strong growth potential.
In August, Dubai witnessed a remarkable surge in apartment values, marking the most substantial increase in nearly a decade. This surge is part of a broader property rally that has turned Dubai into one of the world's hottest housing markets. While the city's housing market has primarily been driven by larger single-family homes until now, it's now pushing up apartment prices, which constitute around 85 percent of the housing supply in the Middle East's prominent business and tourism centre.
According to CBRE Group Inc., a real estate advisor, apartment prices recorded an impressive average increase of 20 percent in the year leading up to August. This performance is the strongest since November 2014 and has outpaced the 17.3 percent price increase seen in single-family homes, locally referred to as villas.
Dubai's real estate market has experienced a resurgence following a seven-year downturn. This revival has been driven by an influx of newcomers, including crypto millionaires, bankers relocating from Asia, and wealthy Russians looking to safeguard their assets. Additionally, the government has implemented a series of reforms, including more flexible visa regulations and the introduction of visas for job seekers and freelancers.
While prices for single-family homes rebounded strongly from their pandemic lows, the recovery for apartments has been comparatively slower. On average, apartment prices remain 9.6 percent below their peak in 2014, while prices for larger houses have risen by 8.7 percent, as reported by CBRE.
ValuStrat, a property valuation and research firm, whose data is based on a fixed basket of representative properties, indicated that apartment prices increased by an average of 10 percent in the year leading up to August. The most significant annual gains were observed on the man-made island of Palm Jumeirah, where prices surged by one-fifth.
Taimur Khan, CBRE's head of research, explained in an interview that as affordability becomes more limited, the demand for apartments is on the rise because they generally tend to be more affordable. Furthermore, Dubai offers considerably higher rental yields compared to cities like London, New York, or Hong Kong.
In Dubai, where the local currency is pegged to the US dollar and rental income is not taxed, apartment yields currently stand at 7.34 percent, as reported by CBRE. In contrast, the average yield in London is 4.18 percent, and in prime central London, where the majority of residents live in apartments, it's even lower at 3.6 percent. Additionally, CBRE notes that the average annual rent for apartments in Dubai is Dh. 106,674 dirhams ($29,000), while for villas, it's Dh. 322,573.
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