Dubai’s thriving property market shows no signs of slowing down, with residential prices projected to rise by an additional 8% in 2025. This continued growth, fueled by a notable shortage in housing supply, is outlined in the latest report by leading property consultancy Knight Frank.

A Record-Breaking Year for Dubai Real Estate

The Dubai Residential Market Review: Special Edition paints a vivid picture of a city in the midst of a property boom. According to the report, house prices across the emirate have surged by 19.9% compared to this time last year. This remarkable increase is underscored by a record-breaking 47,269 property transactions in Q3 2024 alone—a staggering 41.8% rise over Q3 2023.

The value of these transactions is equally striking. Between January and September 2024, deals worth AED 306.3 billion ($83.4 billion) were finalized, marking a 36% increase from the same period in 2023. In Q3 alone, sales volumes reached an impressive AED 116.8 billion.

“House prices in Dubai continue to be fuelled by relentless demand,” said Faisal Durrani, Partner and Head of Research for MENA at Knight Frank. “Prices in the mainstream market continue to edge upwards, climbing by 4.3% in Q3 alone.”

Luxury Market Soars Amid Limited Supply

Dubai’s luxury real estate segment has been a standout performer, with the rate of high-end home sales tripling over the past 18 months. Nearly 1 in every 5 homes in the emirate is now valued at over $1 million, a significant leap from just 6.3% in 2020.

The surge in demand for luxury properties has created fierce competition for prime listings. The total number of properties available for sale has dropped by 30% year-on-year, while demand for refurbished homes in key locations has driven up prices in the secondary market.

“The limited availability of sites across strategic locations in the city is contributing to rising prices for off-plan homes,” noted Petri Mannila, Partner and Head of Prime Residential UAE at Knight Frank.

A City Under Pressure: Supply Challenges Persist

The report highlights a persistent mismatch between supply and demand, particularly in the villa segment. While developers are ramping up efforts, Knight Frank estimates that only 300,000 new homes will be delivered across Dubai by the end of 2029, with 80.1% of this supply comprising apartments and just 17.4% villas.

By the end of 2025, only 19,700 new villas are expected to be completed—insufficient to meet the growing demand for larger homes. This shortage is expected to exacerbate price pressures in the villa market, which has already seen significant appreciation in recent years.

Dubai’s population growth is adding further urgency to the supply issue. By 2040, the city will require between 37,600 and 87,700 new homes annually to house a projected population of 5.8 to 8.6 million residents. However, with delays of up to 30% in planned construction, actual completions could fall well short of these requirements, translating to around 35,000 homes per year—a figure that hints at a long-term housing shortfall.

Macro Risks Could Temper Optimism

Despite the positive outlook for property prices, several macroeconomic factors could pose risks to Dubai’s residential market. A potential global economic slowdown, oil price volatility, and growing regional competition from emerging gateway cities like Riyadh may impact demand.

Knight Frank also warned of the possibility of slowing price growth. “While house prices have seen robust growth, the rate of increase is likely to moderate in 2025,” said Durrani. The consultancy predicts a more modest 5% rise in prime residential values next year, following growth rates of 44.4% in 2022 and 16.3% in 2023.

Investors Flock to a Global Hotspot

Dubai’s real estate market has become a magnet for international investors, drawn by the city’s safe-haven status, tax-friendly environment, and world-class infrastructure. The emirate’s luxury properties, in particular, are highly sought after by ultra-high-net-worth individuals (UHNWIs) from around the globe.

Data from Knight Frank underscores the growing international appeal of Dubai’s real estate sector, with foreign buyers accounting for a significant portion of transactions in 2024. Investors from Europe, Asia, and the Middle East have been particularly active, further driving up demand.

A Vision for the Future

Dubai’s government has laid out ambitious plans to position the city as a global economic and cultural hub. Initiatives such as the Dubai 2040 Urban Master Plan aim to enhance the emirate’s infrastructure, improve quality of life, and create sustainable communities. These efforts are expected to further cement Dubai’s status as one of the world’s most attractive cities for residents and investors alike.

However, achieving this vision will require overcoming challenges in housing supply, urban planning, and market regulation. Industry stakeholders are calling for greater collaboration between developers and policymakers to ensure that the city’s growth remains sustainable in the long term.

The Bottom Line

Dubai’s property market is on a historic trajectory, with soaring demand and limited supply setting the stage for continued price growth in 2025. While challenges remain, the emirate’s resilience and appeal to global investors suggest a bright future ahead. For prospective buyers, the window to secure a slice of Dubai’s real estate market may be narrowing as competition heats up and prices climb higher.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

4th December, 2024