Investors are eager to make investments in Dubai’s highly coveted residential property segment, pushing the prices of ultra-prime properties by at least 15 percent this year.
Global real estate consultancy Knight Frank said the strong demand for the city’s most desirable neighborhoods, combined with restricted supply is helping to drive record price growth.
Knight Frank said just eight new homes are expected to be completed between 2023 and 2025 in the ‘Prime Dubai’ area, including the Palm Jumeirah, Emirates Hills, and Jumeirah Bay Island.
Faisal Durrani, partner and head of Middle East Research at Knight Frank, said the severity of the shortage of new supply, combined with insatiable international demand has driven prime residential prices up by an extraordinary 70.3 percent in the last 12 months.
“The caveat to this stellar growth is that average transacted prices in these exclusive precincts stand at Dh2,900 per square foot, or $ 800, making Dubai one of the most ‘affordable’ luxury residential markets in the world – it is in fact four times cheaper than prime neighborhoods in New York, or London,” Durrani said.
The number of $10 million-plus home sales continues to climb, with a new record likely to be set in 2022, according to Knight Frank.
“Provisionally, we’ve had 82 ultra-prime deals during the first six months of 2022 — these are homes priced at over $10 million. Last year, the market recorded 93 ultra-prime sales, which was an all-time record. At the time, it meant that 2021 had registered nearly 40 percent of all ultra-prime home sales ever recorded in Dubai. 2022 looks set to eclipse this in some way,” Durrani pointed out.
Dubai’s most luxurious homes continue to attract buyers from around the world, according to Knight Frank’s analysis.
Buyers and investors from locations across South America and Eastern Europe are joining the diverse mix of second-home buyers and investors from countries such as Monaco, Austria, Switzerland, India, Singapore, mainland China, the UK, the US, and the GCC, Knight Frank said.
“And those that are in search of yields are finding a market where rental growth has kept pace with capital value increases, meaning there has been no yield compression. On average, rental yields for apartments and villas hover around six percent and four percent, respectively, though these figures are significantly higher in areas where demand for short-term rentals is high,” Andrew Cummings, partner and head of Prime Residential at Knight Frank, said.
Knight Frank expects prices to end the year five to seven percent higher than December 2021, while prime Dubai is forecast to experience a rise of closer to 15 percent over the same period.
Knight Frank said residential values in Dubai have continued to rise during the second quarter and are now 10.1 percent higher than last summer, with prices standing at an average of Dh1,100 per square foot.
“Price rises in Dubai have been sustained in the second quarter, albeit we have noted a slowdown in the rate of growth. Nonetheless, the mainstream market has seen a growth of 10.1 percent in the last 12 months, with villas continuing to lead the charge. In fact, villa values are now 19.3 percent higher than this time last year. The emerging tone for pricing is one of the less steep rises,” Durrani said.
Following the extraordinary growth last year, Knight Frank says values are growing at a more sustainable rate. Indeed, the year-on-year change in villa prices has slowed from about 20 percent at the end of March and 21 percent at the end of last year.
Still, Knight Frank points to the ongoing outperformance of demand and prices at the very top of the market, where demand has not only remained steady but continues to intensify.
“Villas at the very top of the price spectrum in Dubai’s most expensive neighborhoods continue to record strong price growth, which is lifting entire markets. On Palm Jumeirah, villa prices have grown by 51 percent in the last 12 months and by 68 percent since the onset of the pandemic, highlighting the extreme depth of demand for the city’s premiere homes. Not to be outdone, prices for villas in District One and Dubai Hills Estate have also expanded by an impressive 30 percent over the same period,” Durrani said.
Source By: Khaleej Times