Dubai property market may be booming with the likes of Ambanis said to be lapping up massive villas in up-market areas for top dollars, but away from the hot spots, the UAE is in the forefront of a silent revolution in the real estate sector, tipped to soon become the new rage in the segment.
And it is all happening in the virtual world – the metaverse.
The virtual real estate market in the UAE – which began as a novelty at first – has been growing spectacularly of late, with virtual land and apartments selling out fast, with their prices hitting new highs.
Tech-savvy, innovation-focussed ventures such as Crypto House Capital are driving the new virtual real estate assets in the UAE, attracting investors and corporate brands equally to the emerging metaverse sector.
It has been a tremendous past couple of months for the UAE’s real estate sector – as investors bite into the Gulf nation’s bid to become a global hub for property investments.
Just in June this year, sales transactions hit a whopping $6.9 billion – reported to be the highest in the last 13 years, according to data from the Dubai Land Department (DLD).
With this growth momentum only expected to continue in the months to come, several real estate companies have welcomed the UAE government’s recent announcements to tighten real estate regulations – particularly when it comes to payments and investor background checks.
“It will boost the ratio of quality buyers and reduce the money risk factor for real estate agencies,” Ayman Youssef, vice president of the UAE unit of American real estate consultant Coldwell Banker, said.
Dubai continued to buck the trend and rise against the headwinds of inflation, supply chain issues and geopolitical situations, clocking impressive real estate growth numbers.
According to Asteco’s UAE Real Estate Report Q2 2022, both supply and demand were on the up in the emirate.
The report said the first half of 2022 recorded a number of successful and noteworthy project launches, made in the wake of a renewed optimism in the real estate market. This was initially buoyed by a strongly performing secondary market.
This meteoric growth of Dubai’s real estate has resulted in a slew of new projects, physical and virtual backed by innovative technology and growing demand.
Global tech giants such as Apple and Meta are said to be in the race to come out with new devices – Ergonomic 4K VR devices – to fast pace public viewing and adoption of these new digital assets.
“Virtual real estate investments have been blooming in the UAE and the larger MENA regions. As a result of the current investments, virtual properties are becoming more attractive to the public, resulting in unprecedented market growth,” Tomas Nascisonis, chief executive officer of Crypto House Capital, told Arabian Business.
“As UAE is continuously investing in the metaverse, new virtual projects are rising. It is making Dubai a pioneering entity in tech creation. I believe Dubai is one of the top places in the world right now for virtual assets due to its business-friendly environment,” Nascisonis said.
For beginners, virtual real estate is sold in the form of non-fungible tokens (NFTs) and it generates revenue in the form of cryptocurrency.
Properties can be sold or leased for specific periods of time, just like in real life.
Real estate properties in metaverse can be used for a wide range of purposes including cosy gatherings to parties, NFT shows or even concert purposes.
Industry insiders said a virtual apartment can act as a hub that opens up new opportunities as the needs develop. The space can grow with the user.
“For businesses, it is a practical means to assure one’s presence in the digital realm, have an active ground for marketing operations and day-to-day activities, or be a means for an open gallery-type of use.
“For private buyers, owning a virtual apartment opens the doors to creating a perfect metaverse nook. It can be designed as one wishes, and continuously re-purposed,” Nascisonis, a self-proclaimed ‘tech-addict’, said.
Nascisonis said virtual land plots were currently selling out fast, with Sandbox’s top-selling plot, LAND #48766, getting acquired for $57,171 and Decentraland’s top seller, EST #1965, getting purchased for $758,250.
“The current investments by tech giants are pointing to something vast, adding more fuel to the fire,” Nascisonis said, pointing to the growing acceptance of the latest innovation in the virtual property space.
Nascisonis said the process of developing virtual real estate is fairly similar to building physical structures.
One starts with an idea, proceeds with a precise path of financing, purchases a land plot, and establishes the architecture, making adjustments all up to the construction phase.
“The big upside is that we do not have to deal with the labour challenges attached to physical real estate.
Nascisonis said his venture’s current focus was on building the MetaReal City.
“Our latest project, Skylum, is the first residential skyscraper in the metaverse.
“Going forward, we aim to focus on developing virtual schools, universities and other arenas to move towards realising our vision of MetaReal City,” Nascisonis said.
He said ultimately they aim to bridge the gap between real and virtual life with the help of technology.
Industry experts said the new set of virtual real estate creators were moving to establish a flourishing economy inside and around their digital assets by organising entertainment events, art shows, social events and lots more.
“It is an ambitious vision that will take a while to materialise, but the innovating companies are passionate about making it happen,” said a senior executive with a Dubai-based real estate company, who wished not to be identified.
Nascisonis said the growing interest of leading corporate brands to get associated with digital real estate assets is proof for the growing acceptance of this new asset class.
Industry experts consider that the metaverse could very well become the leading marketing avenue of the future, as the new platform – web3 – helps combine social media, gaming and entertainment into one all-encompassing experience.
Nike, Zara, Samsung, Disney, Pepsi, McDonalds and Burberry are just a few of the big players making such moves, Nascisonis said.
Overview of Dubai’s current real estate market
- Dubai real estate transactions hit $381 million
- Dubai real estate remains upbeat on both demand and supply side: Report
- Dubai real estate market set to gain from UAE’s Golden Visa rules
Dubai real estate transactions hit $381 million
The Dubai real estate market recorded residential property transactions to the tune of AED 1.4 billion on Tuesday, August 23.
Tuesday’s property deals included 387 sales transactions worth AED1.15 billion, 68 mortgage deals of AED149.38 million and 85 gift deals amounting to AED140.85 million, according to data released by Dubai’s Land Department (DLD).
The sale deeds included 336 villas and apartments worth AED913.23 million and 51 land plots worth AED241.01 million.
The mortgages included 53 villas and apartments worth AED117.45 million and 15 land plots valued at AED31.94 million.
Real estate transactions in Dubai hit AED10.3 billion ($2.8 billion) during the week ending August 19 – across more than 3,000 deals.
Apartment and villa sales dominated at 2,239, while 344 plots were sold during the week, the DLD data showed.
The biggest transaction was a land sale in Al Wasl at AED400.18 million, followed by a AED205 million land sale in Hadeq Mohammed bin Rashid.
A land in Palm Jumeirah sold for AED130 million was also among the top transactions.
Dubai real estate remains upbeat on both demand and supply side: Report
According to Asteco’s UAE Real Estate Report Q2 2022, both supply and demand were on the up in the emirate.
The report warned that rising construction costs and supply chain issues represent increasing risks for developers and will likely result in delays for projects at pre/early stages of construction, but a majority of projects have been sold with construction milestone-linked payment plans, thus incentivising developers to complete projects on, or ahead of schedule.
Apartment supply picked up markedly, from 6,000 units in Q1 2022 to 7,000 in the second quarter. New villa handovers doubled, reaching 520 completed properties. However, there were no notable new office space handovers over the last three months.
Over the short-term, Asteco has revised materialisation rate. Another 25,000 residential units are expected for handover by the end of the year.
Majority of new deliveries were concentrated in upcoming developments including Damac Hills, Dubai Hills Estate, Wasl Gate and Port De La Mer.
Rental rate growth continued with a similar momentum recorded over the last year. Average quarterly increases realised 4 percent for apartments, 6 percent for villas and 3 percent for offices, whilst annual growth stood at 15, 23 and 13 percent, respectively.
Demand for larger unit types, particularly villas and townhouses, with adequate useable outdoor areas (like balconies and gardens) and a strong community offering remained the focus for residents, thus driving rental and occupancy rates.
Quality apartments in prominent neighbourhoods also recorded an uptick in interest, and not only in established communities such as Palm Jumeirah and Dubai Marina, but also secondary locations with good community facilities such as those surrounding the Expo 2020 site.
Asteco believes the positive benefits of Expo 2020, including infrastructure upgrades and the repurposing of the site, will be felt across a wide range of sectors for years to come. The legacy plan of Expo 2020 Dubai and the Dubai 2040 Urban Master Plan are expected to open in October 2022. It is expected to become an independent free zone, as well as an economic and growth hot spot by featuring affordable housing and becoming a focal point for exhibitions, tourism and logistics.
The report said that while geopolitical developments and rising commodity and energy prices cannot be ignored, they have facilitated, rather than hindered, Dubai’s position as a safe haven.
Asteco expects rental rates to remain elevated in the second half of the year, but rental growth is expected to slow eventually as oversupply remains a lingering concern.
The report added that Downtown Dubai and Palm Jumeirah recorded the highest rental growth of 24 percent year-on-year, followed by Dubai Beach Residence and Dubai Marina (23 per cent). Dubai Hills (42 percent) Palm Jumeirah (41 percent) witnessed the highest growth in villa rental prices.
As many offices started returning to normal schedule, Business Bay area recorded the biggest office rental increase of 21 per cent, followed by 18 percent increase in the DIFC area.
Dubai real estate market set to gain from UAE’s Golden Visa rules
Recent updates to the UAE’s Golden Visa regulations have a positive impact on many sectors, including Dubai’s real estate said, Madhav Dhar, Co-founder and COO, ZāZEN Properties.
Buyer demand for homes above 2 million dirhams is increasing, following the UAE’s move to change the qualification requirements for its 10-year Golden Visa scheme, a real estate developer said.
While many international markets are still coming around from Covid-related lockdowns and restrictions, Dubai’s economy has made great strides.
It has recovered, boosted by higher oil prices and the revival in tourism and trade. It has resulted in exceptional transaction figures in the first half of the year, particularly with regards to off-plan properties and a marked increase in high-end/luxury residential unit sales.
According to the recent Henley Global Citizens Report, 4,000 high net worth individuals are expected to relocate to the UAE this year due to the advanced economic, social, legal and regulatory framework facilitating business, investment and residency.
Average apartment, villa and office sales prices rose by 4 percent, 4 percent and 2 percent over the quarter and 20, 26 and 19 percent annually.
Palm Jumeirah (44 percent) and Business Bay (34 percent) recorded the biggest increase in sale prices for apartments over the last year. Palm Jumeirah (52 percent) and Arabian Ranches (40 percent) witnessed the highest growth in villa sales prices compared to H1 last year.
Whilst demand for off-plan properties grew significantly, the increased cost of borrowing and the lack of affordable homes in the secondary market is squeezing out investors and end-users with more limited resources.
Strong inward investment is expected to continue on the back of advanced business reforms and government initiatives like the Golden Visa and efforts towards transitioning to a digital-driven economy.
The UAE Cabinet updated the long-term visa regulations in April 2022, stating that a Golden Visa (10 years) can be obtained when purchasing a property for AED2 million. The property can be completed or off-plan, and it can be mortgaged through specific local banks.
Additionally, the Dubai Land Department’s decision to make all real estate data publicly available is a sign of a maturing market and will strengthen transparency.
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