The doctor of Real Estate Space analyzes why it is attractive to invest in the Dubai real estate market: high rental yields, demand for luxury homes and return on investments.
Demand for housing will remain high as more resident visas are granted
In 2024, housing supply will still have to keep up with demand. More than 422,000 people have reportedly moved to Dubai in the last five years, accounting for 13% of the city’s total population growth, and this trend appears to continue.
In my opinion, Dubai’s economy will be able to continue to prosper, supporting the city’s demographic expansion, as the global economy emerges from this inflationary cycle. Therefore, over the next five years, there will be almost half a million more people looking for housing if the growth rate we have seen since 2019 continues.
Dubai will remain resilient and investment will continue to come
Dubai’s global economic resilience will keep the city in the public eye until 2024, and investment will continue to flow into the city. The market for continued business expansion will be supported by continued increases in foreign direct investment. This will have a favorable ripple effect on the UAE labor market, driving further population expansion. Together, these conditions will only serve to strengthen Dubai’s reputation as an exciting and successful location for business and investment.
Core communities could appreciate even more
Historically, the number of transactions in more reasonably priced communities like Mira and Mudon has increased annually. Property values in these previously remote locations are expected to rise as a result of the recent surge in transactions. This change, in my opinion, will make a difference between the more desirable neighborhoods and those that are a little further out of the city, leading to a new round of price increases in Dubai’s established neighborhoods.
Sales of ultra-luxury properties in Dubai will continue to boom
Compared to lower price ranges, ultra-luxury home sales in Dubai saw the largest increase in year-over-year transaction activity in the second half of 2023. And there is every reason to believe that demand will continue.
Since the pandemic, Dubai’s overall lifestyle offering, including some of the lowest crime rates in the world, state-of-the-art infrastructure, world-class healthcare, zero percent income tax rates, a favorable economy to business and not to mention the sun and the sea. , and sand—has improved, making the city more attractive to ultra-high net worth individuals (UHNWI) around the world.
Interest and mortgage rates are likely to go down, but we may have to wait until the second half.
Interest rates in the US and the UAE will eventually change as a result of disinflation. Expectations that interest rates will fall during the first half may be overstated, although real estate buyers are no doubt awaiting this news with great excitement. There is now a greater chance that no decline will be noticed until summer at the latest.
Regarding mortgages, some banks began offering lower rates during the first week of January.
The lowest three-year fixed-rate mortgage supply available in the fourth quarter of 2023 was 4.24 percent; However, one bank is now offering a lower rate of 3.99 percent.
More Renters Will Consider Homeownership as Rents Remain High
Rental rates will likely remain high in 2024, which will be a strong incentive for consumers to choose homeownership over renting. Many city residents who have lived there for ten years or more see the United Arab Emirates as their permanent home.
We anticipate the trend of renters becoming buyers will continue, especially for larger homes where monthly mortgage payments are often lower than rent.
I predict that end-user demand will remain strong through 2024 and that the housing market will be driven by long-term buyers for many years.
Renting vs. Buying Case Study
Recently, one of our tenants approached us when he was ready to investigate purchasing a home. A young family who had been in Dubai for ten years was renting a two-bedroom apartment in Dubai Marina for Dh155,000, a substantial amount more than what they were paying a few years earlier. They were able to pay the ADH 550,000 deposit and other expenses needed to purchase their dream home, a ADH 2.4 million townhouse in Villanova, thanks to the savings they had accumulated over many years.
There are two key reasons why this is a wise decision:
A) The family’s monthly mortgage payment is less expensive than the previous rent payment. Dhs130,000 (interest and capital), compared to Dhs155,000 for rental costs.
B) They were able to expand to a three-bedroom villa with a maid’s quarters and take advantage of several extras including a garden, a pool in a beautiful community and more.
News source: Gulf Business