Dubai's Real Estate Market Q1 2024 Insights: A Conversation with Rana Siraj

Dubai has consistently attracted a diverse array of buyers, including investors and end-users, seeking opportunities within its real estate landscape. From towering skyscrapers to sprawling villas, the city offers a spectrum of properties tailored to meet the needs and aspirations of its cosmopolitan population.

In the first quarter of 2024, Dubai's real estate market has experienced remarkable growth. As the latest revelations about Dubai's residential real estate market come to light, they spark curiosity and capture the attention of all those closely following developments in the city's property sector.

To gain a deeper understanding of these trends and glean further market insights, we spoke with Daytona’s Head of Sales and Leasing, Rana Siraj. 

Let's dive into the conversation.

1. What is fueling the continued surge in property sales and rising prices?

Rana: "Dubai's real estate market is booming and experiencing sustained growth in sales and rising prices. Dubai's stable political climate, investor-friendly policies and commitment to infrastructure development all contribute to its appeal as a desirable place to live and work.

One key driver is the city's growing global reputation. Dubai is increasingly seen as a vibrant and secure business hub, attracting a wider pool of buyers, including high-net-worth individuals (HNWIs) seeking investment opportunities and a growing number of professionals seeking career advancement in a dynamic environment. 

Another key factor is Dubai's robust economy. A thriving tourism sector and strategic business environment create a strong demand for housing from residents, not just investors. This increased demand, fueled by both local and international buyers, leads to a competitive market with rising prices."

2. With prices going up, do you think it's becoming harder for buyers to afford properties?

Rana: "Rising property prices for both apartments and villas in Dubai are certainly creating challenges for affordability. Strong demand is pushing prices upwards. Limited supply, especially for readily available move-in homes, further intensifies competition and drives up costs.

Securing a property can be more difficult in this market, especially for those entering the property ladder for the first time. While some can adapt by adjusting budgets or exploring financing, others may struggle to compete.

If affordability becomes a significant barrier, this could potentially lead to a situation where demand softens, especially from first-time buyers and end users."

3. How do you see the shortage of ready-to-move-in homes affecting the market?

Rana: "The shortage of ready-to-move-in homes has multiple implications. It could lead to bidding wars and increased competition among buyers for available properties, thereby driving prices higher. It may also drive increased demand for off-plan properties with faster completion timelines and flexible payment plans. As a result, this could drive up prices in the off-plan segment. 

The lack of ready-to-move-in homes ripples through the rental market with rents on the rise. Buyers waiting to purchase are choosing to rent in the interim and a growing number of tenants are transitioning to ownership, squeezing rental inventory and driving up prices.” 

4. Recent market reports suggest continued growth in Dubai's property market for the next year or so. What factors are driving this?

Rana: "Dubai's ascent as a global hub is attracting a wave of long-term residents, bolstering property demand. This steady influx, coupled with the emirate's stable political climate, investor-friendly policies and ongoing infrastructure development, positions the residential property market for continued growth over the next year.

While the overall outlook for Dubai's property market is positive, potential buyers should remain cautious of potential risks. Economic and geopolitical uncertainties can still impact the market. Global downturns could dampen investor confidence, leading to a potential slowdown in sales. Similarly, regional instability could deter foreign investment."

5. Luxury properties are seeing strong growth. What's behind this trend and do you expect any changes in demand for luxury properties?

Rana: "The outlook for Dubai's luxury property market appears particularly strong. The recent surge in the city's millionaire population is a key indicator. With over 72,000 residents now boasting a net worth exceeding $1 million, Dubai's growing appeal to high-net-worth individuals is undeniable. 

This, combined with Dubai's long-standing reputation for luxury living, world-class infrastructure and thriving business environment, is fueling exceptional demand in the luxury property segment.

Furthermore, the luxury segment itself is gearing up to meet this growing demand. A wave of new projects tailored specifically for HNWIs is emerging. This focus on exclusivity and bespoke offerings further strengthens the allure of Dubai's luxury market."

6. Rental yields are increasing. How can tenants adapt to recent changes in the rental market?

Rana: "Dubai's rental market underwent a significant change in March 2024 with the recalibration of the RERA rental calculator, an update that aimed to bring rental prices closer to current market value. Previously, tenants who stayed put benefited from lower mandated increases compared to signing new leases. However with the revised calculator reflecting a more dynamic market, some renewals might see steeper rent hikes.

So tenants are seeking ways to adapt to rising rents. Homeownership is becoming a viable option for some. For those not quite ready to buy, extending their current lease might be a good strategy. Additionally, exploring longer-term rental contracts could yield lower overall costs due to potential landlord negotiations for extended stays. Finally, venturing outside familiar areas and considering neighboring communities might present more budget-friendly options.

7. How stable do you think Dubai’s property market is in the face of economic and geopolitical uncertainties?

Rana: “Dubai's property market presents a complex picture when it comes to stability. On the positive side, the emirate boasts a strong track record of weathering economic and geopolitical storms. Its established reputation as a top destination for property investors, coupled with investor-friendly policies and a focus on infrastructure development, creates a foundation for resilience.

However, economic and geopolitical uncertainties can still pose challenges. Global downturns could dampen investor confidence, leading to a potential slowdown in sales across the market. Similarly, regional instability could deter foreign investment, impacting overall market activity.

Overall, while economic and geopolitical uncertainties pose potential challenges, Dubai's established strengths and diverse investment landscape position it well to navigate these headwinds.”

8. While things are looking positive now, what signs might indicate a potential downturn?

Rana: "Dubai's residential real estate market is currently thriving but even amidst this positive outlook, potential warning signs could indicate a future downturn. Global economic slowdowns are a key concern as dampened investor confidence could lead to a decrease in demand, particularly for the luxury segment heavily reliant on foreign investment. 

Similarly, regional instability could deter foreign investors altogether, potentially causing an oversupply of properties and putting downward pressure on prices.

Rising interest rates pose another threat. If financing costs climb significantly in 2024, purchasing property could become more expensive, discouraging potential buyers, especially those relying on mortgages and leading to a slowdown in sales.

It's also important to consider saturation within specific areas. While the overall market might be strong, a surge in off-plan properties concentrated in certain neighborhoods could lead to oversupply, causing stagnant or even declining prices in those pockets."

9. For buyers looking to enter the market right now, what strategies do you suggest to manage risks?

Rana: “Dubai's booming residential market offers exciting possibilities but navigating it requires a strategic approach for both end users and investors looking to buy properties in Dubai.

For end users, thorough research is key. Understanding current trends, price variations across neighborhoods and future development plans helps identify properties that fit your budget and long-term needs. Consider renting initially in your desired area to gain firsthand experience. Prioritize location, focusing on proximity to work, schools and amenities. While affordability is important, a well-located property with strong resale potential offers long-term security. Don't get caught up in bidding wars. Instead, focus on quality and value by seeking properties in good condition with a solid maintenance record.

Investors can diversify their portfolio by considering a mix of property types like residential units and commercial spaces to mitigate risk across market sectors. Maintain a healthy level of financial leverage. While leverage can amplify returns, overextending yourself exposes you to greater risk during downturns. Assess your financial capabilities and secure favorable financing terms. Finally, adopt a long-term perspective. Dubai's market has shown resilience but short-term fluctuations are inevitable. A patient approach focused on acquiring quality assets with strong long-term value will likely be more rewarding than chasing quick profits.”

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