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Analyzing the Performance of Dubai’s Real Estate Sector in Q3,2022

Dubai’s real estate is on a roll. The sector has witnessed another successful quarter despite economic downturns and rising inflation levels globally. A vast amount of credit goes to the positive impact of Expo 2020, the FIFA World Cup, massive investment by the government into the infrastructure, the transformation of Expo city into a hub for businesses and residents, and the revolutionization of Expo village into a world-class & energy sustainable residential community for domestic citizens. All these factors made Dubai’s real estate sector more attractive for investors to invest in and have resulted in a colossal increase in real estate transactions in 2022. 

In the first 9 months of 2022, Dubai’s real estate has surpassed the total number of transactions recorded last year with 71,278 real estate transactions recorded. This is an 18.1% increase compared to 2021 when the real estate sector witnessed 60,347 transactions. This year so far has also been good for the luxury property sector. There has been a substantial rise in the sales of ultra-prime properties and luxury villas which were in the price range of AED 100-300 million

Real estate Transactions: Q3, 2022

Dubai’s property market is going through its finest days. The third quarter of 2022 has been one of the best quarters. The data from Dubai Land Department reveals that the real estate sector recorded 25,503 transactions worth AED 69.5 Billion (US $ 18.92 billion) in Q3, 2022. This was over a 17% increase in the value of transactions from Q2, 2022 with the total number of real estate transactions worth AED 59.15 billion

The total number of transactions in Q3, 2022 increased by 14% compared to the previous quarter i.e. from 22,504 to 25,496, and by 61% year on year. The sales of off-plan properties increased by 30.9% in Q3, 2023 compared to the previous quarter to reach 11,774. 

Surge in Property Prices in Q3, 2022

Dubai’s property market always remains lucrative for global investors due to its high ROI and several other advantages. This is one of the reasons property prices always show an upward trend. According to #Report: Dubai Real Estate Market Q3 2022 by Morgan’s International Realty, the property prices per sq. increased by 4% in Q3, 2022 compared to the previous quarter. Compared to Q3, 2021, the property prices in Q3, 2022 have increased by 16%

The property prices have decreased significantly compared to 2021. Villa and apartment price gains slowed to 24.6% year-on-year and 19.0% y/y respectively. 

Rise in Rents

The average rent for apartments has surpassed the average rent price for villas in Q3 on a y/y basis (22.6% y/y compared to 22.1% y/y). This is predominantly due to a substantial increase in the average rent of three-bedroom apartments which has more than doubled in Q3, 2022 compared to the second quarter. 

FIFA World Cup in Qatar in November this year will attract a vast number of visitors to Dubai which will have a favourable impact on rent prices. Both rents & prices for commercial properties will increase as the demand for business space rises substantially. 

Impact on the Secondary Market 

Secondary market (ready property) transactions were stable as compared to the previous quarter, yet 52% higher than the previous year. Primary market (off-plan) transactions increased by 31% quarter-over-quarter and 74% year-over-year due to an increase in new developments launched by the developers to meet the increased demand from high-end luxury property buyers.

Increase in the Demand for Prime & Super-prime Properties

The demand for prime properties (worth AED 10 Million) and super-prime properties (worth USD 10 Million) have increased exponentially. Transaction volumes for properties valued at AED 10 million or more increased by 9% Q-o-Q and by 34% Y-O-Y. 

Transaction volumes for super-prime properties valued at USD 10 Million (AED 36.5 million) and above registered no change in Q3, 2022 compared to Q2, 2022. However, transaction volume was 88% higher compared to the same period the previous year. 

The number of transactions for properties with a value of AED 100 million (USD 27.3 million) or more increased by 33% from the previous quarter and by 300% from the previous year.

Most Popular Areas

Business Bay, Downtown, and Damac Lagoons remained the most popular areas in terms of the highest number of transactions in Q3, 2022. Palm Jumeirah was at the pinnacle in terms of the largest value of transactions during the quarter prominently due to a surge in the demand for prime & super-prime properties. There were a total of 593 transactions, and their combined worth of AED 5.6 billion

Most Expensive Property Sold

The most expensive property sold in Q3, 2022 was an 8-bedroom villa named Casa Del Sole mansion by Alpago Properties Sold for AED 302 million (USD 82.2 million) on Palm Jumeirah on July 05

Outlook for Q4, 2022

In Q4, commercial property sales will compete with residential property and their overall performance will improve. This is very evident from the data of Q3, 2022 which suggests that the transactions for office retail surged by 21% quarter over quarter and by 75% year over year. Business Bay remains the top choice of investors to buy a commercial property. 

There has been an increase in the number of new properties with over 31,000 new units added to the industry between Jan-Sep 2022. There has been an emerging trend of an increase in sales of off-plan properties combined with a pronounced slowdown in sales of existing properties. The announcement of the list of new mega projects and master communities is also great news for the real estate sector.

Due to rising inflation & interest rates in the US, the interest rates will also increase in Dubai as The Central Bank of the UAE follows the policy rates from US Federal Reserve given the dirham’s peg to the dollar. This will lead to higher costs of borrowing loans for the developers and will result in an increase in property prices in 2023 & 2024.