Real estate in the UAE, especially Dubai, has been on a boom for over a year.
Many expats have decided to make Dubai home for the long-term giving them the confidence to invest in a family home which they can make their own.
With interest rate changes, new trends in the housing market, and musings on whether rents will continue to rise, here are six trends to watch for in the UAE real estate market for 2024
1. The UAE job market and the global economy will remain strong
Dubai’s global economic resilience is poised to remain a cornerstone of strength in 2024, allowing the city to remain in the global spotlight. As the emirate continues to attract increased levels of direct foreign investments and foster an environment conducive to business growth, the ripple effect on the UAE’s job market is expected to be very positive.
Dubai real estate: Do not ‘waste money’ on rent, buy instead, says expert
Robust economic activity is likely to generate increased employment opportunities across various sectors, contributing to ongoing population growth and affirming Dubai’s status as a vibrant business and lifestyle hub on the global stage.
2. Interest rates and mortgage rates are likely to fall
Interest rates in the US, and therefore in the UAE, are expected to fall this year as a trend of disinflation continues to be observed. However, expectations that interest rates will fall during H1 might be overstated and there now appears to be an increased probability that any reduction might not be seen until the summer and beyond.
When it comes to mortgages, in the first week of January, we saw several banks offering reduced rates. During Q4 2023 the lowest three-year fixed rate mortgage product on the market was 4.24 percent which has now been surpassed by a bank offering a lower rate of 4.19 percent.
3. Dubai’s luxury residential market will continue to see high levels of demand
Dubai’s ultra-luxury home sales experienced the largest increase in year-on-year transaction activity in the second half of 2023 when compared to lower price brackets, as reported.
Since the pandemic, the city has increased its appeal to Ultra-High-Net-Worth-Individuals (UHNWIs) across the globe, due to improvements in Dubai’s overall lifestyle offering including some of the lowest crime rates anywhere in the world, advanced infrastructure, excellent healthcare, zero percent income tax rates, a business-friendly economy, and that’s not to mention the sun, sea and sand.
Dubai has become increasingly appealing to Ultra-High-Net-Worth Individuals (UHNWIs) worldwide since the onset of the pandemic.
4. Population growth will remain high which will maintain the demand for new homes
Dubai’s population has risen by 13 percent in the last five years reportedly growing by over 422,000 and is on still on an upward trajectory. If the city is to grow by the same percentage over the next five years, there will be 475,000 people looking for somewhere to live.
In my view, the emergence of a soft landing for the global economy as we transition out of this inflationary cycle leads us to believe that Dubai’s economy will continue to flourish which will fuel its population growth.
5. Well-established communities will benefit from the rise in valuations of more affordable housing
With transaction volume increasing year-on-year across the historically more affordable communities in Dubai (such as Mira, Mudon and those that are a bit further out) we expect to see a rise in property valuations within these locations. This shift is expected to narrow the gap, initiating a fresh wave of price appreciation in the city’s more well-established communities.
6. Rents will remain high making more people look at home owning as an option
In the year ahead we expect that rental rates will continue to stay elevated, serving as a significant motivator for people to opt for homeownership versus renting. We saw this happening last year with many of our tenants converting to buyers when they worked out that their monthly rental fee was a similar cost to what their monthly mortgage payment would be on a bigger property.
Many expats have decided to make Dubai home for the long-term giving them the confidence to invest in a family home which they can make their own. I believe end-user demand will remain robust into 2024 and a long-term buyer mindset will continue to drive market activity for many years to come.
Rent vs. Buy case study:
One of our tenants recently came to us as they were ready to look into buying a house. They are a young family who have lived in Dubai for ten years and were living in a two-bedroom apartment in Dubai Marina, paying AED155,000 in rent, which is significantly higher than the rent they were paying a few years ago. With the savings they’ve accrued over many years, they were able to afford the AED550,000 deposit and fees they needed to buy their dream home which was an AED2.4 million townhouse in Villanova.
This is a smart move for two main reasons. A) The family’s monthly mortgage payments are cheaper than what they were paying in rent. AED130,000 (capital and interest) vs AED155,000 rental cost. B) They were able to upsize to a three-bedroom villa with a maid’s room and enjoy the benefits of having more space, a garden, a nice community with pool and much more.
