May 2024's volumes and value were boosted by sustained demand for offplan sales in Dubai. As the city readies to take in more high netwroth residents, there is plenty more of pricing action on the horizon... Image Credit: Supplied

The stampede among investors for UAE real estate went into overdrive in May as Dubai property kept shattering records. The city racked up the highest number and value of transactions ever seen.

Transaction volumes soared 53 per cent year-over-year, reaching 17,713 deals. To top it off, the total value of these climbed 38 per cent, hitting a remarkable Dh46.5 billion. In May, the offplan market reached a record high in both volume and value, with 11,107 transactions valued at Dh22.7 billion.

Dubai has already surpassed established powerhouses like New York, London, and Hong Kong for the number of homes sold over $10 million. According to new search, an investment of $1 million in the sprawling metropolis of Dubai gets you 980 square feet as compared to 355 square feet in London; 366 square feet in New York; 409 square feet in Los Angeles; 344 square feet in Singapore; and 462 square feet in Sydney for the same investment.

This is a highly lucrative proposition for global citizens who wish to settle in a cosmopolitan city with business-friendly policies, superior infrastructure, and highest safety.

Built around new high networth resident inflow

These factors are attracting a significant influx of business professionals to the UAE. Surveys conducted by migration focused consultancies reveal Dubai’s millionaire population has grown 78 per cent over the last 10 years. The city houses over 72,500 HNIs with $1 million or more in liquid assets in addition to 212 ‘centi-millionaires’ (individuals with a net worth of $100 million or more) and about 15 billionaires. Overall, Dubai's population grew by over 25,700 in Q1-2024 alone to 3.6 million. It is projected to reach 7.8 million by 2040.

Analysts estimate the city will need to construct approximately 51,440 new homes annually to meet this demand, with even more needed to accommodate tourists.

Overall, the UAE’s real estate market is projected to reach Dh2.6 trillion ($707.86 billion) by the year-end. Dubai witnessed the sale of 105 luxury homes in Q1-2024 alone, valued at over $10 million each. This marks a 19 per cent jump from Q1-2023.

The cumulative value of luxury homes sold in Dubai in Q1-2024 surged 6 per cent year-over-year to $1.73 billion. Dubai's HNI population is projected to witness a stellar 24.6 per cent annual increase by 2025, which will invariably fuel demand for luxury properties.

Property prices in Dubai have been on a steady uptrend since 2020, appreciating by approximately 48 per cent. This impressive growth has brought prices close to their 2014 peak.

Several noteworthy projects are on the pipeline catering to different price points. Nonetheless, analysts expect demand to outstrip supply by a wide margin. The deficit is currently estimated at 190,439 homes.

Another price spike?

This could potentially trigger a 5-7 per cent jump in property prices per annum in both this year and the next. The rental yield on apartments in Dubai has risen 32 per cent since early 2020.

However, it is approximately 10 per cent lower than the 2014 peak, which signals ample room for further improvement. The 5-6 per cent rental yield in Dubai is higher than 3 per cent for China and India.

Dubai is also an appealing destination for commercial property investors because it offers an average RoI of 10-15 per cent. Analysts expect the UAE’s commercial real estate sector to hit $307.1 billion towards the end of 2024, marking an annual CAGR of 3.01 per cent during 2024-28.

By 2028, its market value is expected to surge further to $345.8 billion.

Vijay Valecha

The writer is Chief Investment Officer at Century Financial.