The latest data on the UAE real estate market at the beginning of the third quarter of 2022 demonstrate that prices have begun to decline and stabilize in all directions, except for the construction and premium sector. Today, the last two can be placed in a separate category of the market, as they are increasingly trying to adapt to a specific European buyer. This buyer is wealthy and he is afraid.
Rich residents of European countries, Russia and Ukraine see a clearly forming economic storm on the horizon, so they strive to find a quiet bay for their impressive savings as soon as possible. Dubai has become such a bay in the last two years and, by all accounts, it will remain such a bay for quite a long time.
This role of the emirate is understood by local developers and realtors, so they pay special attention to filling the premium market with new objects created specifically for Europeans. This property under construction can be purchased now as part of an «off-plan» investment and foreign buyers are actively using this opportunity, thus spurring price growth to increasingly unhealthy indicators. The average transaction price per square meter for real estate under construction in July 2022 was at $4,310, which is almost $600 higher than the same month in 2020 ($3,700) and more than $1,500 higher than in July 2015 ($2,740).
The opposite and healthier trend is demonstrated by the wide ready—made housing market - there is a large and diverse offer, many options for different categories of buyers. If we compare the objects being put into construction with ready-made houses put up for sale, then the price gap between them ranges from 14% to 30%. And this gap will only continue to widen.
For example, the price of a new building from a developer in Downtown Dubai usually starts from $7,620 per square meter. At the same time, the finished object will cost the buyer $5,860 per square meter. Another example is Dubai Hills. One of the most popular areas among investors shows a gap from $4,690 for new buildings to $4,100 for finished properties.
Such a gap in itself is already extremely attractive for an ordinary buyer. But it becomes even more attractive in the context of rising mortgage lending rates. Tied to the US Federal Reserve rate, the UAE Central Bank's lending rate will continue to rise, which will force more and more people to look for other ways to reduce the cost of purchasing real estate. The era of «free» money is over, and with it ended the pursuit of a wide buyer for super expensive houses.
As already mentioned, the decline and stabilization of prices is a healthy trend that the local market needs more and more if its participants want to avoid overheating and irreparable consequences of such a development of events.
Positive stabilization trends are observed in the residential real estate market in the sector of ready-made villas and apartments. To some extent, they can also be observed in the market of «off-plan» villas. On the other hand, in general, villas in the «off-plan» sector continue to grow, including due to their shortage. Apartments in the premium segment are also growing.
In general, investment interest, at the moment, is acquired by ready-made objects from realtors or banks, as they have a reserve for growth and confident development. There is no pronounced deficit on it and it is not overheated.