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In the year 2023, property prices in Dubai have surged by an impressive 20% annually, outpacing the growth rate observed in the preceding year. This catapults Dubai to the position of the second-fastest growing real estate market globally, following closely behind Turkey. In stark contrast, the global average for property price growth languishes at a near-decade low of 3-4%.
On the top of that, in some city’s areas rental yields exceed 10%. This makes Dubai a major player in global residential property investments.
The surge in house prices, however, does not signify an overheated residential property market in Dubai. UBS’s latest Global Real Estate Bubble Index, unveiled in September, designates Dubai as one of the world’s safest markets in terms of the risk of a residential property price correction, indicating a market that is reasonably priced. Even with the remarkable surge, inflation-adjusted house prices still hover around 25% below their 2014 peak. Bolstered by substantial growth in real incomes and an influx of affluent and skilled migrants, the residential property value in Dubai is anticipated to sustain its double-digit growth for years to come.
Henley & Partners’ report forecasts an influx of approximately 4,500 millionaires relocating to Dubai this year, with the UAE issuing over 3.4 million new residence permits in the last 12 months—equivalent to over a third of its current population.
Knight Frank’s recent report has bestowed upon the emirate the title of a “global outperformer,” emphasizing the escalating demand for luxury waterfront homes amid a backdrop of limited supply. But the allure of Dubai’s real estate market extends beyond the high-profile city center and Jumeirah villas.
Housearch.com, a prominent online property search hub, underscores a “notable shift in housing preferences,” as individuals increasingly opt for smaller, more affordable homes in less expensive neighborhoods. Housearch.com identifies areas to the South and South-East of the city center as burgeoning with growth potential, rebounding in property values and currently standing at approximately 50% of their 2014 levels.
Data from CBRE Group, a leading real estate investment firm, reinforces this trend. Neighborhoods like Remraam, Liwan, Discovery Gardens, Motor City, and Dubai Investment Park stand out, providing landlords with noteworthy gross rental yields ranging from 9-10%. Coupled with anticipated property value appreciation, an investment in buy-to-rent residential property in these neighborhoods could potentially yield an annualized return on capital of around 20%. In contrast, prime locations like Palm Jumeirah offer a more modest 5-6% gross rental yield and are considered more susceptible to market cycles.
While the allure of luxury properties in iconic locations endures, from a buy-to-rent investor’s standpoint, the less glamorous areas of Dubai seem to offer more rewarding prospects. With robust rental yields and expected property value appreciation, these areas are swiftly emerging as the new frontiers in Dubai’s dynamic real estate market.
