Out of all the major cities in the world, Dubai’s property market is expected to develop at the fastest rate this year; nevertheless, the high level of new supply may cause a mild correction in the near run.
According to UBS Global Real Estate Bubble Index 2024 released on Tuesday, Dubai’s score has increased from 0.14 in 2023 to 0.64 this year. Meanwhile, the emirate’s ranking in the index has risen from 23rd last year to 14th this year.
Factors driving Dubai’s property market growth
Due to the population growth in Dubai, which has climbed by around 230,000 since the start of the year, property values and rentals have been rising for the previous three and a half years. Some analysts have warned about a minor short-term slump in the emirate’s real estate market due to the constant price increases.
The emirate’s house market was rated fair value last year and has elevated to the moderate bubble risk category this year.
UBS Global Real Estate Bubble Index insights
“After a seven-year price correction, the bubble risk signal in Dubai was low in 2020. Since then, transaction numbers have reached new all-time highs each year, and excess supply has been absorbed. In the last four quarters, real housing prices increased by almost 17% and are 40% higher than in 2020. A high proportion of – likely speculative – off-plan transactions and an elevated new supply could trigger a moderate price correction in the short term,” the Swiss bank said in its annual report.
“Only a moderate risk is recorded in Amsterdam, Sydney, and Boston. In the same risk category are, after extreme reductions in imbalances, Frankfurt, Munich, Tel Aviv, and Hong Kong. Vancouver, Dubai, Singapore, and Madrid complete this group of moderate-bubble-risk cities. Dubai recorded the strongest increase in the risk score of all the cities analyzed,” UBS said.
Recent market trends and projections
Emirates NBD Research, which was published in September, states that due to a significant off-plan supply this year, the total number of transactions recorded throughout the city has driven the overall number of units sold in 2024 to 104,250, only 14,000 units shy of the entire transactions recorded in 2023.
The Swiss bank’s annual study projected that house prices in Dubai would achieve over 5% growth annually in 2024, followed by Warsaw, Miami, Amsterdam, Tokyo, Vancouver, Madrid, Singapore, Zurich and Sydney.
Also Read: Why do buyers pay more for branded Dubai luxury homes?
Property Monitor’s analysis
In August, Property Monitor said Dubai’s property price growth experienced its second-highest monthly gain of the current market cycle, with a monthly increase of 2.48%. This is more than double the growth rate of last month and the average monthly growth experienced year-to-date.
“A large driver behind this surge is directly related to the sheer volume of new off-plan project sales in communities that previously had few new launches or where new launches and ready property sales were typically balanced,” said Property Monitor, a part of Cavendish Maxwell group.
