Experts assert that while Dubai’s real estate market is currently “a bit hot,” it isn’t hurtling towards a bubble or an imminent catastrophic crash.
In 2023, residential sales prices surged by 20 percent in the emirate, with city-wide rents climbing 9 percent higher, according to the latest findings by Cushman & Wakefield Core. Despite this, Dubai remains comparatively more affordable per square meter than global counterparts like Hong Kong, Singapore, Zurich, and Tokyo, according to the Global Property Guide. However, concerns persist regarding the potential for a real estate correction akin to the 2008 downturn.
Maurice Gravier, chief investment officer at Emirates NBD based in Dubai, acknowledged that the market might be overheated in the short term but emphasized promising medium-to-long-term prospects due to the rising population.
Since successfully navigating its way out of the COVID-19 pandemic in the summer of 2020, Dubai has embraced an open-door policy to attract investment, with the government implementing economic reforms to diversify away from oil. This includes making visa policies more flexible, offering longer residencies for select categories of investors, students, and professionals. The emirate aims to boost its population to 5.8 million by the end of the next decade as part of the Dubai 2040 urban master plan.
Contributing around 9 percent to the emirate’s GDP, Dubai’s real estate market witnessed a notable increase in the number of home sales exceeding $10 million in 2023, growing by 92.4 percent to 431 sales, as per analysis by property consultancy Knight Frank. The total value of sales above this threshold rose by 91 percent to $7.6 billion last year, with 28 percent of it achieved in Q4 alone.
Tatjana Lescova, associate director and primary credit analyst at S&P Global Ratings, expressed concerns in November regarding the rising risks of a cyclical slowdown and a potential mild price reversal. She highlighted that property prices were approaching their previous peak levels, which could dampen buyer interest and decrease demand.
Approximately 40,000 new units are anticipated to be added to the Dubai market this year. However, Julien Lafargue, director and chief market strategist at Barclays Private Bank, reassured that there’s currently no indication or signal suggesting a recurrence of the 2008 crisis.
Lafargue emphasized that each crisis is unique, suggesting that if the previous one was financial and linked to real estate, any potential future crisis would likely differ. Meanwhile, forecasts by Knight Frank suggest that house prices in Dubai’s Palm Jumeirah, Emirates Hills, and Jumeirah Bay Island are expected to rise by 5 percent this year after recording growth of 15.9 percent in 2023 through September.
Anita Gupta, head of equity strategy at Emirates NBD, noted that while the 2008 crash was driven by excessive leverage in the market, the current situation involves more controlled leverage. She stated that, for now, demand and supply seem to be balanced, indicating stability in prices.
