Property values in Dubai may climb as much as 12% this year, an increase that risks pricing some people out of the expatriate-dominant city, according to real estate consultancy Cushman & Wakefield Core.
Home prices could rise 8% to 12% this year after surging 20% on average in 2023. That’s even though 39,400 homes were completed — the highest number since 2020 — which helped ease demand. Rents, meanwhile, are expected to jump between 10% and 12% this year, compared with 19% in 2023 and 27% in 2022.
“Affordability is a growing concern for the low to mid-market segment,” Prathyusha Gurrapu, head of research and advisory at the property firm Cushman & Wakefield Core said in a report. “Although we don’t foresee the sharp rises witnessed in 2023 to continue in 2024, we believe the market will see rises at sustainable levels.”
Still, limited post-handover payment plans in the off-plan market and potentially lower interest rates “are expected to support the secondary sales market and help moderate price increases,” according to Gurrapu.
Dubai’s property market last year broke a decade-long record for home sales, while rental rates jumped to unprecedented levels. The rebound from a seven-year slump has been fueled by an influx of wealthy investors, and the government has also relaxed visa laws and introduced permits for job seekers and freelancers.
The rally is emboldening developers as they seek to capitalize on the surging demand. Advance sales of apartments climbed 78% last year, while off-plan sales of villas fell 31%. Emaar Properties PJSC delivered about 26% of new supply last year, Azizi Developments about 15% of new homes and Damac Properties about 8% of properties.
More than 65,000 homes are due to be completed this year in areas such as Meydan One, Business Bay and Downtown Dubai, but Cushman & Wakefield Core expects that only 32,000 will be built. About 76% of the new supply with be apartments.
The rise in rentals has pushed gross yields to a seven-year high. Yields on apartments stand at 7.3%, while those on family homes reached 5.5%, according to the report.
Rising rents are causing “significant upheaval as tenants grapple with rental escalations” and many choose to to stay in existing homes. New rents are significantly higher than renewed rents, the report said.