The growth in the value of real estate in Dubai is starting to slow down — a healthy trend after a 10% jump in the second quarter of 2022

The growth in the value of real estate in Dubai is starting to slow down — a healthy trend after a 10% jump in the second quarter of 2022

Prolonged explosive growth is not something that is useful for any market, including the real estate market. This is true for any country at any level, including the Dubai real estate market.

Breaking all expectations and breaking all records, the growth of the emirate's construction sector in the last 2 years has already begun to turn from its main strength into its main weakness. But fortunately, after a 10% jump in prices in the second quarter of 2022, the local real estate market finally began to slow down, cool down and stabilize. Although not in all segments.

Today, the cost per square meter of residential real estate, on average, is around $3,220 — the result of an increase of 10.1% in the period from April to June 2022. This is above stable $2,300 – $2,600 per square meter, which were observed 12 months earlier, at the end of the second quarter of 2021.

Villas remain one of the hottest categories of real estate. At the end of the second quarter, their cost was 19.3% higher than the cost a year earlier. However, the demand does not weaken for expensive objects, the premium segment is 10.8 million dollars and above. Palm Jumeirah is in the lead, where the price of villas has increased by 51% over the past 12 months (about 68%, if measured from the beginning of COVID-19). The districts of District One and Dubai Hills Estate are also in high positions in terms of price growth for premium villas — about 30% in annual terms.

In general, it is expected that if the market as a whole turns out to be 5-7% more expensive than the market at the end of 2021 by the end of this year, then the premium segment will be almost 15% more expensive. This difference is explained both by the extremely high demand from wealthy buyers from Europe, Russia and Ukraine, and by the shortage of objects on the market. According to some analysts, in the 12 months since June 2021, prices in the premium residential segment have increased by an astounding 70.3%.

Dubai simply does not have such a large number of luxury villas to meet the existing demand, and this is most evident on Palm, Emirates Hills and Jumeirah Bay Island. A total of 8 new houses are expected to be commissioned between 2023 and 2025. Of course, in relative terms, Dubai is still cheaper than, for example, New York or London, but in fact it is quite dangerous for this sector to grow further.

If we exclude the super-expensive premium segment, the market growth has slowed down markedly in the last 12 months. The difference is obvious if you pay attention to the same villas. At the end of 2021, their growth was 21%, at the end of the first quarter of 2022 — 20%, at the end of the second quarter of 2022 — 19.3%.

Read also