Prices in Dubai’s residential market continue to expand, with prime residential prices, which encompass the Palm Jumeirah, Emirates Hills and Jumeirah Bay Island, rising 58.9% in the last 12 months, according to global real estate consultancy Knight Frank.
Overall, Dubai house prices grew by 10.6% last year and increased by a further 2.6% during the first three months of 2022, according to Knight Frank analysis.
The latest increase leaves values 11.3% higher than those of the first quarter of 2021; the highest annual growth rate since January 2015.
Faisal Durrani, Partner and Head of Middle East Research, Knight Frank, explained: “Positive market sentiment, driven by the government’s world-leading response to the pandemic, coupled with the successful staging of the World Expo.
The reopening of travel corridors and Dubai’s global safe haven status continue to underpin the market recovery.
“Despite the sharp change in prices, values are still, on average, around 25% below their 2014 peak, but villas are now just 12.9% below the latest market high in 2014″.
The boom of prime and ultra prime continues
Knight Frank also points to a growing disparity in the expectations of buyers and sellers; a trend identified in the second half of 2021.
This trend persists in some segments of the market, which is beginning to have the overall effect of causing average price increases to slow, just as Knight Frank previously forecast. Overall villa prices grew 3.2% during the first quarter, compared to 3.4% in the last three months of 2021, marking the slowest quarterly increase in more than two years.
Durrani said: “This slowdown in price growth is not uniform across the board, with the city’s most expensive locations still locked in Dubai’s version of the ‘roaring twenties’. This outperformance is being driven in large part by the influx of foreign UHNWI capital that continues to target Dubai’s most luxurious homes.
“The Palm Jumeirah and Emirates Hills continue to cement their iconic status, with global buyers continuing to vie for an address in Dubai’s most exclusive enclaves. The prices of villas in Palm Jumeirah have increased by 38.6% in the last 12 months, for example. Additionally, there were a record 93 ultra-Prime home sales in 2021 – these are homes priced over US$10 million. During the first quarter, we have registered another 32 ultra-Prime operations, surpassing the second best annual total established in 2015”.
Knight Frank data reveals Palm Jumeirah posted 10.9% villa price growth in the first quarter alone, with the most expensive villa ever sold in Dubai trading on the iconic island during March for a record AED 280 million.
Similarly, in the exclusive Emirates Hills, the annual growth rate of the price of villas stood at almost 20% at the end of the first quarter, with the period between January and March registering an increase of 6.5%.
Andrew Cummings, Partner, Head of Prime Residential, Knight Frank, explained: “Yes, there is evidence that some places may be starting to come off the boil, but this is in contrast to the narrative playing out at the higher end of the market. Palm continues to post some exceptional record sales, however these have predominantly been custom-built villas, with traditional Nakheel-built villas now reaching a level where buyers are starting to hold back.Similarly, Jumeirah Bay has seen a slowdown in land sales with land prices now exceeding AED 100 million.
However, demand remains at record levels, with international buyers alongside domestic end-users looking for larger homes. This, coupled with a lack of quality housing supply, continues to drive price increases. Recent changes in visa laws, which allow investors and end-users to obtain Golden Visas for off-plan purchases and mortgage use, are likely to have a positive effect on the market.
Market to stay hungry for villas
On the supply side, Knight Frank forecasts that a further 100,000 units will enter the market by the end of 2025, with more than 50,000 homes to be completed during the remainder of 2022. Only 25% of the planned homes are forecast by 2025 they will be villas.
“The impact of supply pipe on the market outlook should be segmented by both property type and location. Until the end of 2025, only 8 new villas are expected to be built in the main residential areas of Dubai, clearly indicating the continued outperformance of the villas at the top of the market, as there is nothing to suggest an alleviation of the shortage of luxury homes. soon”, concluded Durrani.