With Dubai real estate continuing to rally with record-breaking months, all eyes have turned to the luxury end of the market due to the sheer lack of supply in high-end units. According to Reidin Data Analytics, March was the second-highest month on record for transactions over AED 10mn with 199 transactions. The previous record high was in October 2015.
As Dubai has transformed over previous years, the city’s real estate space has evolved from having a drive of affordable housing in 2017-2019, to a city with a real undersupply of high-end units.
With demand currently outweighing supply, the key driver of the demand is driven heavily by overseas investment coming from Europeans and Russians. For these buyers visiting Dubai with no awareness of historical pricing, Dubai appears affordable compared to their home countries.
Coupled with how well Dubai has handled the pandemic, 100 percent foreign ownership of companies and flexible visa options, this all has led to a surge in demand, particularly in the high-end market. In times of inflation, real estate is considered a strong hedge which is definitely having some contribution towards the demand we’re seeing.
In the ready market, many of the mega mansions are in short supply. Sellers continue to maintain high price expectations and continue to increase these with their hope that prices will continue to rally with the lack of supply and increasing demand.
The lack of available inventory in the secondary market has pushed more interest towards off-plan. Recent launches for the high-end market include branded luxury residences including The W Residences Downtown, The Dorchester and Six Senses.
However, many of these projects are selling at such speed it indicates that the upcoming supply is still not enough to meet the rising demand. The attraction of off-plan has also been spurred on by European interest. With many Europeans having a high taste and high bar for quality, they can find it difficult to locate secondary market homes which meet their quality standards, thus have been exploring off-plan to ensure high-quality finishing and bespoke designs.
Developers have picked up on this lack of supply, with some developers shifting focus from the ‘bread and butter’ studio and 1 beds and catering more towards luxury, larger units. With many buyers coming from overseas, these purchases are often second or third homes opposed to being their core residence, thus an apartment is a strong option with minimal upkeep compared to a villa.
When looking at supply constraints, the supply chain crisis being witnessed across the world has yet to show any impact on developers operating in Dubai. Developers delaying project launches by a quarter or two is not unfamiliar territory for Dubai, yet thus far we’ve seen nothing to signal anything untoward.
However, as we head through 2022, this will no doubt be something developers will be keeping a close eye on to ensure they meet their deadlines and handover dates.
Matt Gregory, CCO at houza.
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