House prices in Dubai jumped 21 percent this year thanks to the government's response in arresting the spread of COVID-19, which triggered interest in the property market from rich investors outside the emirate, according to a study by global property consultant Knight Frank.
While developers are responding by pushing the envelope and bringing AED 10,000 per square foot homes to the market, more modestly priced properties continue to languish in Dubai's third property cycle. Indeed, residential values overall are still some 29 percent below the 2014 peak.
Faisal Durrani, Partner-Head of Middle East Research, Knight Frank said: “Excellent governance has always been a defining feature of the United Arab Emirates. And the post-Covid bounce currently underway in Dubai’s real estate market, which is driving the emirate’s third property cycle, is a reminder of the authorities’ phenomenal response to the pandemic."
“Yes, buyer habits have evolved over the course of the last 18 months, but the feel-good sentiment injected into the market by the way in which infection rates have been arrested in the UAE has played an incredibly strong part in driving villa prices up by 14 percent since January 2020,” he added.
The analysis also highlights that there are very early signs to suggest that 2021 may also end up marking the peak of Dubai’s third property cycle. "While values are still creeping up, anecdotal evidence points to an emerging delta between seller and buyer expectations, a classic sign of a rising market that may soon stall. In fact, total transaction volumes in October declined to AED 11.2 billion, still marking the busiest ever October for the market, but a decline on the previous month, nonetheless," Durrani said.
Meet the rich buyers
This year, the buoyancy in the real-estate market has caught the attention of buyers from outside the emirate. According to the analysis by Knight Frank, non-resident, ultra-high-net-worth individuals are flocking to the city to buy expensive properties.
Buyers from Monaco, Switzerland and China are driving an even sharper rebound at the top of the market, Knight Frank said.
"$10-million-plus home sales now account for 7 percent for all transactions in the city by value, compared to a long-term average of just 2 percent," Durrani said.
The most expensive areas in the city are experiencing the sharpest turnaround in values, with apartments in locations such as The Palm Jumeirah (+14 percent) and Downtown Dubai (+8 percent) outperforming apartments (-3.1 percent) in general, since the start of the pandemic.
Similarly, villas in Mohammed Bin Rashid City (+19%), Dubai Hills (+18%) and the Palm Jumeirah (+17%) have accelerated ahead of the wider villa market, highlighting the disproportionate impact of positive market sentiment on luxury home values.
(Reporting by Seban Scaria; editing by Daniel Luiz)
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