The Dubai real estate market has been on an upward trajectory, with no signs of slowing down.
Dubai’s property market hit AED346 billion in transactions during the first half of 2024, marking a 23 percent increase from 2023, with 100,520 deals closed and 50,000 new investors entering the market, as per recent figures released by the Dubai Media Office (DMO) on X (formerly Twitter).
As Dubai’s real estate market continues its strong performance in 2024, potential investors are increasingly asking: Is now the right time to invest in villas? Here is what experts told Arabian Business.
Dubai real estate market is currently seeing ‘strong investor activity’
“We are still seeing strong market performance heading into the second half of 2024,” Lewis Allsopp, Chairman of Allsopp & Allsopp Group said.
“Buyers have enjoyed strong returns over the past three years and this has continued with the average price per square foot (for villa sales) up 22 percent year-on-year and sales transaction volume up 80 percent for the same period, showing huge demand from investors and buyers across the market. I firmly believe Dubai still offers great value compared to other global cities for real estate returns,” Allsopp added.
The market is currently seeing “strong investor activity,” he added, as off-plan sales triple compared to the same period last year. This significant increase in both prices and transaction volume suggests a robust market for villas.
Charlie Bannan, Managing Director of haus & haus Real Estate, explained that buyers looking to invest in villas “can look to getting 5-8 percent return (net) on investment.”
One of the key factors driving the villa market is the current imbalance between supply and demand. “Recent industry figures suggest that if every property that has been developed was handed over right now, out of the total properties completed there is only about 15 percent that are villas and townhouses,” Bannan said, adding that this scarcity of supply relative to demand is likely to support villa prices in the medium term.
Moreover, the luxury segment of the villa market is particularly buoyant. Allsopp reports that 196 properties sold for over $10 million in the first half of the year, indicating strong demand at the high end of the market. This trend is further evidenced by recent record-breaking sales, such as an AED105 million villa in Tilal Al Ghaf, handled by Allsopp & Allsopp’s Private Office team.
Should investors buy villas or wait?
However, both experts stressed on the importance of careful consideration before investing.
“Before making a real estate purchase, buyers should thoroughly evaluate their financial situation. This includes assessing their overall budget and determining the maximum amount they can afford to spend on the property,” Allsopp said.
Bannan echoed this sentiment, adding, “They should consider the sale price, plus circa 6-7 percent fees. If they are purchasing with a mortgage, there will also be a mortgage amount of 0.25 percent of the loan amount which is payable to the Dubai Land Department (DLD).”
“The benefit of buying property in Dubai is that it is incredibly easy – most of the processes are digital if you are overseas. When it comes to the transfer process, yes you need to be here in person, but it is also easy to get a power of attorney for someone to be here for you as well. Compared to most major cities in the world, the process here is a breeze,” he explained.
Prime areas for villa investments in Dubai
However, for those considering villa investments, location is a crucial factor.
“Communities such as Tilal Al Ghaf, Town Square, and Villanova are prime examples of how well Dubai’s city boundaries have expanded. When launched over three years ago these communities were seen as ‘far outside’ Dubai’s more established residential communities. Fast-forward today, and they are now amongst the more in-demand locations with demand and sales/rental prices soaring,” Allsopp said highlighting several areas that have seen significant growth.
Dubai Hills Estate has made “good property money for many,” including initial purchases and re-sales, Bannan shared.
“The most exciting comparable location coming to market now is Tilal Al Ghaf, which is in the middle of handover for many of the sub-communities and the master community is starting to take shape. Investing in a master community has proved successful for many with examples being Emirates Living (Springs, Lakes, Meadows), Arabian Ranches, Jumeriah Golf Estates to name a few,” he added.
The experts also pointed to government initiatives as key drivers of future demand for villas.
Instead of trying to predict when the market will drop, Bannan believes it is more sensible to instead question why the market would drop.
“The Dubai government is doing so much to attract people to come and live and work here, such as implementing the Dubai 2040 Urban Master Plan, which aims to enhance quality of life through increased green spaces, and improved infrastructure – not to mention introducing long-term visas like the Golden Visa to attract skilled professionals, investors, and entrepreneurs,” he said.
The Dubai 2040 Urban Master Plan, which includes initiatives such as a sustainable corridor through the major highway and multiple metro line expansions, is expected to further boost the appeal of villa communities, Allsopp added.
Rental yields are another important consideration for villa investors
For those weighing whether to invest now or wait, both experts leaned towards acting sooner rather than later.
“It might be a cliché, but it is not about timing the market, it is about time in the market. If you are thinking of it as a short-term investment, then you need to really analyse the data, alongside expert advice. But most people are buying a family home or see property as a long-term investment,” Bannan said.
“Villa rental yields on average stand at 5.23 percent with a year-on-year change of 1.16 percent. Based on top year-on-year rental yields, the top communities include Dubai Investments Park (11 percent), Meydan (11 percent) and Motor City (8 percent),” Allsopp said, adding that investors who bought properties over three or more years ago often see better yields today due to overall rent and price increases, sometimes exceeding 10 percent in some areas.
Allsopp further categorised potential villa buyers into three groups:
- End users (homeowners): We are seeing a huge increase in first time buyers and rental tenants looking to escape ever increasing rents in Dubai. Homeownership/rental savings can be significant in many cases for those that are able to make the jump onto the property ladder. Our Mortgage teams can help end users at all levels assess the financial implications of any home purchase and sales agents are on hand to find first time buyers their dream home.
- Property Investors (property investors): With rental rates across the city hitting new heights, landlords are seeing excellent rental yields from tenants. For an investor seeking short-term returns (rental income) and the potential for capital appreciation, buying on the ready/secondary market remains an attractive option for many.
- Long-term investors (property speculators): Dubai remains an excellent choice for both residential and international property investors, who are prepared to invest today in anticipation of greater capital appreciation gains in the future. For these investors, off-plan investment opportunities are seen as a great opportunity, evidenced by sell out on project launches across the city in the first half of 2024.
Looking to the future, both experts expressed optimism about the villa market’s trajectory.
“The population growth will have the biggest impact – the continuation of more families moving to Dubai and making it a home for the foreseeable future will have a positive effect on prices,” Bannan said.
Allsopp added that Dubai’s strong tourism sector, with 9.3 million visitors recorded in the first half of the year, further reinforces the market’s positive trajectory. “Ultimately, your decision to buy now will depend on your real estate goals, and appetite for risk and return window,” he concluded.
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