Stock JBR Jumeirah beach residence Dubai property
The current cycle of super-charged gains in Dubai luxury property category is because demand is far outstripping supply. Image Credit: Gulf News Archives

The property market in Dubai is looking more attractive than it ever has – prices are on the rise, records have been broken several times over the past two years, and demand is at an incredible high. There is one question that pops up amidst all of this, from seasoned investors and those who are considering whether to invest in the market: Is it too good to be true?

The last time the Dubai market looked this rosy, it turned out to be the glossy sheen of a bubble that burst and led to a sharp downturn. It’s perhaps unsurprising that one might view the current state of the market with some trepidation. But is it warranted? I don’t think so.

Starting in late 2020, Dubai’s real estate sector was on a hot streak as the city opened up while many of its global contemporaries were still struggling with lockdowns. Property prices went up in the face of surging demand and a shortage of supply, and prime communities benefited enormously.

However, the truth of the matter is much of that price increase is effectively an adjustment from the ‘Covid pricing’ that went into effect in the early part of 2020. With economic uncertainty looming large, buyers and landlords were willing to price themselves below the market and cut perceived losses.

Still fair valued

Now, they are pricing themselves in accordance with where the market is at present, which is still well below the all-time pricing high seen in 2014 (roughly 25 per cent below).

In a report released by Swiss investment bank UBS, 25 major cities were ranked according to their Global Real Estate Bubble Index. Only four of these cities were determined to be ‘fair valued’ (holding a score of between 0.5 and -0.5 as per the index) – Dubai, Milan, Sao Paulo and Warsaw. With a very healthy score of 0.16, Dubai is one of the most fairly valued cities in the world, coming second to Warsaw, with a score of 0.15.

Toronto and Frankfurt are considered to be at risk of a bubble (a score of 1.5 or higher), while other key players such as New York, Los Angeles and Singapore are in the ‘overvalued’ tier, with a score between 0.5 and 1.5. For all investors who might be eyeing up the Dubai market with caution, the message is clear.

There is a tremendous appetite for prime and super-prime homes at present, but very little supply to satisfy that demand. This is part of the reason we have been seeing record-breaking transactions taking place in areas like Palm Jumeirah, Emirates Hills and Dubai Hills Estate.

Pay that ‘premium’

For the right buyer, if a property ticks all the boxes on their list and if it is the only home of its kind on the market, then paying a premium for it becomes justified. In recent months, we have seen a slight rise in the supply of bespoke homes, as villas with construction delayed by the pandemic are starting to be handed over.

However, these releases are still few and far between, and will ultimately only serve to increase demand further. I was cautiously optimistic about the real estate market in 2019, predicting that it was due for a positive turn.

I don’t think I’m alone in saying that things took off at a much more rapid pace than anyone could have predicted, especially with the continuing presence of the pandemic. That being said, the market is still poised for greater things, and the data only confirms what my team and I have been saying all along – now is the right time to invest in Dubai.

At the rate things are going, buyers at the lower end of the prime market run the risk of getting priced out if they wait too long. And those who are anticipating the burst of a bubble may find themselves waiting indefinitely.