Dubai’s property market is racing towards a record bull run, with the Middle Eastern commercial hub’s buoyant economy and swelling population fuelling the longest price rally since the eve of the 2008 financial crash.
Properties in Dubai sold for an average of Dh1,750 ($476.50) per square foot last month, according to data provider Reidin, a surge of 75 per cent from February 2021.
Some question how long the meteoric price rises can continue in a city that has experienced two boom-bust cycles since its property market opened up in 2003.
The 50-month rally is hurtling towards the 57-month record that ended with the global financial crisis, according to Reidin. Dubai at the time suffered a real estate crash that exposed unsustainable debts at some state-owned companies and required a bailout from Dubai’s oil-rich neighbour Abu Dhabi.
The soaring property values are underpinned by Dubai’s robust economy, with the city capitalising on its decision to open up to visitors during the pandemic while other hubs still restricted travel. The UAE also liberalised its visa system in 2022, encouraging more expats to see the city as home for a longer period.
Newcomers have included everyone from millionaires trying to avoid tax rises to white-collar workers hoping to cash in on the oil-rich Gulf’s growing markets, and Ukrainians and Russians fleeing the impact of Moscow’s invasion of Ukraine.
That influx has caused Dubai’s population to swell nearly half a million since the beginning of 2020, according to Dubai Statistics Centre estimates, hitting 3.8mn this year.
That means Dubai’s villas and flats — popular with speculators in the past — are now in demand from people wanting to settle. “They’re building a lot of apartments and not building enough houses,” said Barnaby Compton, a Dubai real estate agent. “We have an ageing population and we have more families moving in with kids.”
Malek, a Dubai-based banker who asked for his real name not to be used, bought and renovated a spacious villa in the Arabian Ranches suburb last year.
He had intended to move in, but demand was so high that selling became irresistible. Realising he could make between a “60 [and] 80 per cent annual return” by selling the property, Malek said he would put his house on the market this week.
“There is a strong appetite,” he said, adding that he expected the house to go for between Dh1.5mn and Dh1.9mn and had already bought another property. “The upside is too attractive not to sell.”
Property values at the top end of the market have climbed fastest. Prices in gated communities, made of villas and often set around golf clubs, “increased over 100 per cent in the last four years”, said Alec Smith, head of sales and leasing at Savills in Dubai.
Smith and others argue that price rises will be sustained by Dubai’s growing population, with Dubai’s Urban Master Plan assuming there will be 4.6mn people living in the emirate by 2030.
The boom has given a new lease of life to Dubai’s property developers, who had been struggling with years of falling or stagnant prices before the rally.
Dubai government-backed Emaar, the emirate’s biggest developer, posted property sales of Dh65.4bn ($17.8bn) for 2024 — its highest ever — with profit before tax of Dh10bn, up from Dh8.4bn the previous year. Smaller property players have also reported strong results.
Developers are raising money to fuel land purchases and massive construction. This includes tapping Islamic bonds or sukuk, with the volume of issuance in 2024 by real estate or property companies in the UAE jumping 25 per cent year on year to $2.17bn, according to Dealogic.
According to Knight Frank, 300,000 homes are slated to be built in Dubai between late 2024 and 2029, with about 50,000 units being ready to move into annually — higher than previous average deliveries of 36,000 homes per year.
The city’s skyline is now dotted with cranes, while construction sites throw up dust everywhere, from the luxury downtown Business Bay district to the more affordable suburb of Jumeirah Village Circle.
Worsening traffic, a product of the swelling population, has become a source of pain for longtime residents, with Dubai’s transport authority and the ruler’s investment group Dubai Holding last week signing an Dh6bn deal to improve the city’s road networks.
Tamara, also not her real name, lived in Dubai for three years with her partner before spotting a roomy villa with a garden last year for a “decent” price in a leafy lakeside community.
Although they were wary about the market’s volatility, they decided to buy the house, expecting they could “rent it out for a lot more than what we’re paying right now”.
“Within the next five years I think that the market is probably going to still be OK,” she said. However, “I don’t think the market for too long will carry on rising”. The house has been on the market for 10 weeks and has yet to secure a tenant.
Katralnada BinGhatti, chief executive of the eponymous developer, argued that climbing supply did not preclude further price increases.
Will Dubai continue to “see the double-digit growth? Obviously not, because that’s how any market behaves,” she said, but added she was “fairly confident” the market would stay in “a healthy place for the short to medium term”.
Analysts also say reforms after Dubai’s real estate crash of 2008 and 2009, including requirements for larger down payments on mortgages, have made the market more resilient to a downturn.
But others are unconvinced that prices can keep increasing. In a potential sign of pressure, developer Danube has started marketing one bedroom flats “for the price of a studio”.
“I don’t think it will keep going up like that because now there is a lot of competition,” said Talal Al-Gaddah, senior executive vice-chair of developer MAG, who argued that developers would start undercutting each other to capture market share.
If you price below your rivals, “you win the market faster and you sell faster,” said Gaddah. “So the prices will not go up, because of the massive competition.”
