Any fears that Dubai’s real estate market would slow down in 2023 were put to bed in Q1, with the market recording record transaction volumes, up 58% on Q1 2022. Despite the continued upward trajectory of interest rates, and the wobbles seen in the banking sector in March, the market has remained incredibly resilient, bucking global trends and attracting an ever-widening global audience.
Domestically, demand remains strong. Rising rents and the fear of receiving an eviction notice are increasingly being cited by residents as the main reasons to get on the property ladder. Mortgage buyers at Betterhomes increased in Q1, although their share of sales fell as off-plan sales in the wider market eclipsed secondary market sales for the first time since before the pandemic.
Supply remains tight in both the sales and rental markets, meaning little relief from price increases for buyers and tenants. Affordability considerations have tempered the rate of increase at a macro level, although the luxury segment continues to power ahead. With approximately 35,000 new homes being delivered in 2023, we don’t expect there to be a sufficient increase in ready supply to materially impact prices until late 2024 or into 2025.
Looking ahead to Q2, new deals agreed at Betterhomes were up 37% in Q1 as compared to Q4 2022, so we can expect the DLD to report further transactional growth in the coming months. Strong GDP numbers, resilient oil prices and tax-efficient rental returns at 6%+ are likely to ensure that the current market dynamic continues for the foreseeable future. With the prospect that interest rates have now peaked and could be set to fall towards the end of the year, a key headwind to the market could be reversed, further supporting demand beyond 2023.
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