The Dubai real estate sector continues to thrive, but there are signs of a slowdown, according to Cushman & Wakefield Core in its Q2 2024 market update.
The real estate agency said that while Dubai’s market continues to perform steadily across most indicators, signs of stabilization are emerging, and the pace of growth is slowing, particularly in the secondary residential market, which is progressively entering a phase of stabilization.
In the second quarter of 2024, the number of properties handed over to buyers fell markedly, although the number is expected to surge in the year’s second half.
Dubai real estate stabilization
The property price in Dubai has increased for the 16th consecutive quarter, with a 21% annual increase.
Ultra-prime properties are performing well, with more than 300 homes sold for AED20m ($5.4m) and above in Dubai between April and June.
Despite this, signs of a steadying of growth are emerging, according to Cushman & Wakefield Core.
Rising launches with moderate handovers
In Q2 2024, the number of handovers was comparatively lower than in Q1 2024, with only 5,391 units delivered as opposed to nearly 8,350 units in Q1.
Throughout 2024, 24,300 residential units are expected, increasing the yearly total to about 39,000 units. This is comparable to the number of handovers in 2023 and by market demand.
Prathyusha Gurrapu, Head of Research and Consulting at Cushman & Wakefield Core, said: “Growing from a high base, new project launch volumes continue to see record numbers with a 42% y-o-y increase, as demand and absorption remain buoyant.
“We have also seen developers with large landbanks initiating projects and smaller private developers aggressively acquiring land, which continues to be a challenge to source.“
The off-plan market dominates, and the secondary market stabilizes
Prathyusha said: “Until the end of 2021, the differential between off-plan transactions and secondary market transactions was limited; however, over the last two to three years, off-plan transactions have sharply increased, underpinned by the rise in new project launches.
“While secondary market transactions have shown a moderate growth of 5%, off-plan transactions saw a substantial spike of 61%.
“In Q2 2024, off-plan transactions accounted for more than double the number of secondary market transactions, indicating that the off-plan market has a higher share of investors than end-users.“
Signs of stabilisation
Prathyusha said: “Primary off-plan sales prices (inventory sold by developers) are higher than secondary off-plan prices (resales by individuals) across most Dubai districts and off-plan projects.
“Although the percentage difference is still in single digits, it suggests that sellers are struggling to match original prices and selling slightly below market value to exit.
“This trend is worth monitoring, as it may grow in the coming quarters with more off-plan supply entering the market.“
Additional signs of a stabilizing market include more sales listings in H1 2024, which had no change in advertised prices, compared to fewer listings where prices increased over the same period.
In addition, since Q3 2023, the median residential listing price has decreased on a quarterly average of 7%, showing a shift in the market.
Prime Dubai real estate market
While city-wide sales prices continue upward trajectories for the 16th consecutive quarter with a 21% year-on-year increase, According to Cushman & Wakefield Core, although mainstream and inexpensive districts are experiencing substantial price rises that have a significant impact on their affordability, prime districts have seen relatively small increases in sales prices.
Dubai remains a solid global ultra-prime market, with more than 305 residential properties sold above AED20m ($5.4m) in Dubai in Q2 2024, marking a 12% y-o-y increase.
However, real estate experts have noted a marked slowdown in off-plan transaction volumes over the past two quarters.
Prathyusha said: “This is mainly due to the lower off-plan inventory available for these ticket sizes. That said, secondary market ultra-prime transactions have retained their steady activity levels with 135 transactions – the highest number of secondary market ultra-prime transactions registered in Q2 2024.
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Rents rise, yet the villa market moderates
Cushman & Wakefield Core said: “We saw a relative stabilization in city-wide villa rents, which have risen by 13% year-on-year, whereas apartment rents are up by 22% compared to last year.
“Household incomes are not keeping pace with rising rents, further contracting disposable incomes. We have seen a higher percentage of tenants continuing to renew, with the number of renewals in Q2 2024 seeing a 14% increase.
“Similar to the trends seen in the sales market, rents in the mid-market apartment districts saw the steepest rent rise, whereas prime districts saw lower levels of increase“.
