Wealthy investors may have to pay extra for a luxury house in Dubai next year as prices are set to rise further and post the highest growth globally on the back of strong buyer interest and demand-supply imbalance in the segment, according to a new report. 

By the end of 2022, prices of premium apartments and villas in Dubai will be 50% higher than last year and increase further to post an average growth of 13.5% in 2023, the highest in the world, Knight Frank said in a report released on Tuesday. The city’s mainstream residential market is forecast to register price increases of 5% to 7%. 

Dubai’s prime market, which includes the neighbourhoods of The Palm Jumeirah, Emirates Hills and Jumeirah Island, has already witnessed record price growth this year. The growth has been driven by the city’s safe-haven status, relatively affordable property prices, strong demand from international ultra-high-net-worth buyers and improved business sentiment. 

While Dubai’s flats and villas have become pricier each year since the pandemic, the city’s property prices remain one of the most affordable in the world, with rates trailing 2014 peak levels by 21.4%, according to Knight Frank. 

“Adding to the city’s appeal is its relative affordability, with prime homes transacting for around $800 per square foot, making Dubai one of the most affordable luxury residential markets in the world,” said Faisal Durrani, Partner – Head of Middle East Research at Knight Frank. 

Dubai also has limited housing stock, with the number of new high-end homes planned already failing to keep pace with demand. 

“Just eight villas in Dubai’s prime precincts [are] expected to be delivered by 2025. Developers have not responded to the buoyancy in demand as we have seen in past cycles,” Knight Frank said. 

Price increases in other markets

Dubai will be the only city that will post double-digit growth in prime property prices next year. The second-highest price increase will be in the prime market of Miami, which is expected to post a 5% increase, followed by Dublin, Lisbon, Los Angeles, Madrid, Paris and Singapore, which are likely to see prices rising at 4% . 

Zurich, which has been ranked by other studies as one of the costliest cities to live in, will see prime home prices growing by 3.5%, while Monaco, known as a tax haven for the rich, will see a growth of 3%. Shanghai and New York are forecast to post 2% increase in prices. 

Knight Frank tracked 25 cities for its study. Globally, prime residential prices are forecast to post an average growth of 2% next year, down from 2.7% predicted six months ago. 

“Despite this slowdown, aggregate growth in 2023 would still be higher than that recorded in six of the last ten years,” Knight Frank said. 

(Reporting by Cleofe Maceda; editing by Seban Scaria)