House prices in Dubai grew by 10.6 percent in 2021 and rose by a further 2.6 percent during the first three months of 2022, according to a recent analysis shared by Knight Frank.
The latest increase leaves values 11.3 percent higher than Q1 2021, making it the highest rate of annual growth since January 2015.
Meanwhile, prime residential prices, encompassing Palm Jumeirah, Emirates Hills, and Jumeirah Bay Island, surged by 58.9 percent over the last 12 months, according to global real estate consultancy Knight Frank.
The partner and head of Middle East Research at Knight Frank, Faisal Durrani, said: “The positive market sentiment, driven by the government’s world-leading response to the pandemic, coupled with the successful hosting of the World Expo, the reopening of travel corridors, and Dubai’s global safe-haven status continues to underpin the market’s rebound.
“Despite the sharp turnaround in prices, values are still, on average, about 25 percent below their 2014 peak, but villas are now just 12.9 percent below the last market high in 2014”.
Disparity between buyer and seller expectations
Knight Frank also pointed to a growing disparity in buyer and seller expectations; a trend identified in the second half of 2021.
This trend is persisting in some segments of the market, which is starting to have the overall effect of causing average price increases to slow, just as Knight Frank previously forecast.
Overall villa prices grew by 3.2 percent during Q1 2022, down from 3.4 percent in the final three months of 2021, marking the slowest quarterly increase in over two years.
Durrani explained: “This slowing price growth is not uniform across the board, with the city’s most expensive locations are still locked in Dubai’s version of the ‘Roaring Twenties’. This outperformance is being fuelled in large part by the influx of overseas UHNWI capital that continues to target Dubai’s most luxurious homes.”
Prices of prime and ultra-prime properties continue to boom
The Palm Jumeirah and Emirates Hills continue to cement their iconic status, with global buyers continuing to jostle for an address in Dubai’s most exclusive enclaves.
“Villa prices on the Palm Jumeirah have increased by 38.6 percent in the last 12 months, for instance,” Durrani revealed.
In addition, there were a record breaking 93 ultra-prime homes sold in 2021. These are homes priced at more than $10 million.
“During Q1 2022, we’ve recorded another 32 ultra-prime deals, exceeding the second best annual total set in 2015,” Durrani added.
Knight Frank’s data reveals that the Palm Jumeirah, registered villa price growth of 10.9 percent during Q1 alone, with the priciest villa ever sold in Dubai transacting on the iconic island during March for a record AED 280 million.
Similarly, in the exclusive Emirates Hills, the rate of annual villa price growth stood at almost 20 percent at the end of Q1, with the period between January and March registering a rise of 6.5 percent.
The partner and head of Prime Residential at Knight Frank, Andrew Cummings, said: “Yes, there is evidence that some locations may be starting to come off the boil, but this sits in stark contrast to the narrative playing out at the top end of the market.
“The Palm continues to see 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. Likewise, Jumeirah Bay has seen a slowdown in land sales with prices for plots now exceeding AED 100 million.”
However, demand remains at record levels, with international buyers along with domestic end users searching for larger homes.
This coupled with a lack of supply of quality homes continue to fuel price increases. Recent changes to visa laws, which enable investors and end users to obtain Golden Visas for off plan purchases and using mortgages is also likely to have a positive effect on the market.
Market to remain starved of villas
When it comes to supply, Knight Frank forecasts another 100,000 units will enter the market by the end of 2025, with over 50,000 homes due to be completed during the remainder of 2022. Just 25% of the homes expected by 2025 are forecast to be villas.
“The impact of the supply pipeline on the market’s outlook needs to be segmented by both property type, as well as location. Through to the end of 2025, just 8 new villas are expected to be built in Dubai’s prime Residential areas, hinting strongly at continued outperformance of villas at the very top of the market as there is nothing to suggest an easing of the luxury home drought any time soon,” Durrani concluded.