Impact of the tourist boom on the real estate market in the UAE

As of today, the UAE tourism sector has fully recovered from the pandemic crisis. The country is one of the leaders in this industry in the Middle East. In H1 2023, the flow of tourists to the Emirates exceeded pre-pandemic levels, reaching 8.55 million people. The recovery of tourism has had a direct impact on the real estate market in Dubai. Villas and apartments in the city have been consistently increasing in price, showing high ROIs and good liquidity. Let's take a closer look at how the tourist boom is affecting the UAE real estate market.

Content:

• Growth of the tourism industry in the UAE
• Impact of Tourism on Housing Demand
• Advantages of real estate investment in the UAE
• Housing price dynamics
• Real estate trends in the UAE: prices in tourist areas
• Infrastructure projects related to tourism growth
• Forecasts and the future of the real estate market in the UAE

Growth of the tourism industry in the UAE

By the end of H1 2023, Dubai’s tourism sector witnessed steady growth. The number of tourists visiting the city during this period reached 8.55 million, surpassing the pre-pandemic figures of 2019 when 8.36 million foreigners visited the emirate during the first half of the year. The annual tourist flow has been increasing by an average of 20%, solidifying its status as one of the most frequently visited cities in the world.

Dubai is most popular among tourists from Western Europe (approximately 20% of the total tourist influx), the Middle East (28%), South Asia (17%), Russia, the CIS countries, and Eastern European countries (14%).

In H1 2023, compared to the same period in 2019, several indicators of the hotel industry showed growth:

• The average hotel room cost increased by 20%.
• The average length of stay in hotels increased from 3.5 to 3.9 nights.
• The average hotel occupancy rate increased by 2.2% and reached 78%, which is one of the highest rates in the world, despite a 26% increase in the number of hotel rooms in the city during this time.
• The total number of occupied rooms increased by 32%.
• The ROI for a hotel room increased by 24%.

A significant role in the increase in the number of hotel rooms and the quantity of hotels has been played by the growth of both domestic and international investments in the UAE.

In the Emirates, marine infrastructure is actively developing. Dubai is one of the popular destinations for yacht and cruise tourism. In the 2022–2023 season, the number of cruise tourists here increased by 125%, and the number of ship calls at local ports increased by 29% compared to the previous season.

Dubai is also a popular hub for gastronomic tourism. There are more than 13,000 cafes and restaurants offering dishes from 200 cuisines around the world. Many of these establishments have prestigious awards and Michelin stars.

Furthermore, the metropolis constantly hosts festivals and international events such as the Dubai Esports and Games Festival, Arabian Travel Market, Dubai Food Festival, Dubai Summer Surprises, and more. These and other events attract guests from all over the world to Dubai.

Impact of Tourism on Housing Demand

Several key points highlight how the tourism boom is affecting the real estate market in the UAE.

1. Today, in many emirates, new resort complexes and luxury hotels are being constructed, including those managed by major international brands. Such projects attract tourists from around the world, which is why investors eagerly pour money into them. Resort property in Dubai has good liquidity, as it offers a high return on investment and quickly pays off.
2. Residential apartments and villas located in coastal areas and on artificial islands are in high demand among foreign buyers. Such properties can be rented out for long-term or short-term periods, providing a stable passive income of up to 13% per year. Additionally, due to the limited supply, real estate in seaside complexes consistently appreciates in value.
3. Another important factor driving demand for resort villas and apartments in Dubai is the opportunity to purchase properties during the construction phase at an attractive price. Such properties can increase in value by 20–30% by the time they are ready for occupancy. After construction is complete, investors can either resell the property at a good profit or lucratively rent it out.

Advantages of real estate investment in the UAE

Among the benefits of purchasing real estate in the United Arab Emirates, the following can be highlighted:

• Constant growth in property prices. Over the past 9 years, apartments and villas have on average appreciated by 1.3 times. In premium locations such as Jumeirah Bay, Bluewaters Island, and Palm Jumeirah, the growth rate has reached 50–100% in just one year.
• No annual property tax and a favorable tax policy. For property buyers, there is a one-time property tax fee of 4% of the property's value. When renting out the property, there is a 5% tax on the rental income, which is the responsibility of the tenant.
• Low real estate market risks in the UAE and high investment returns. On average in Dubai, the annual return on investment ranges from 5–8%.
• The opportunity for non-residents to acquire property in full private ownership in specially designated freehold zones. In Dubai, there are more than 60 such zones, including popular areas like Dubai Marina, Palm Jumeirah, Business Bay, and Jumeirah Village Circle.
• The cost of luxury properties is significantly more advantageous compared to other major cities (5.5 times lower than in London and 7 times lower than in Hong Kong), while the quality of housing is on par with international counterparts.
• One can obtain a resident visa for themselves and their close family members by purchasing property in Dubai with a value starting from $204,000.

Housing price dynamics

In Q3 2023, Dubai recorded 36,708 real estate transactions, which is 21.3% higher than the same period in 2022. The majority of these purchases were for properties under construction.

According to a CBRE report for Q2 2023, the average prices for apartments and villas in Dubai increased by 16.9% annually. Specifically, the average cost of apartments increased by 17.2%, while the growth rate for villas reached 15.1%.

The real estate market in Abu Dhabi is currently experiencing active development. The city boasts several resort areas with excellent beaches and infrastructure. New residential and commercial projects are being constructed where apartments and villas can be purchased in private ownership with installment options directly from the developer.

Housing prices in Abu Dhabi are not rising as actively as in the neighboring emirate. In Q2 2023, apartment prices increased by 0.79%, while villas appreciated by 1.7% annually.

Real estate trends in the UAE: prices in tourist areas

Villas and apartments in coastal areas and on artificial islands are highly sought after. In fact, for several years in a row, there has been a trend of increasing demand for properties in the luxury segment. Particularly popular are properties by the sea, in elite golf communities, and in newly developing communities with well-planned infrastructure. Let's take a look at the most popular tourist areas in the emirate and the average cost of off-plan residential properties:

• Dubai Marina is a coastal area with a large yacht harbour, beautiful beach, shopping mall, and good transportation accessibility. The average price per square metre is $13,700.
• Jumeirah is a large community stretching along the Persian Gulf coastline. In some neighbourhoods, there are freehold projects, but most properties are sold to foreigners for long-term ownership only. Price per square metre is $7,700.
• Business Bay is a business district with numerous upscale hotels and an extended Dubai Canal promenade. The average price per square metre is $7,500.
• Dubai Hills Estate is a prestigious and environmentally-friendly community with a golf course, park, shopping mall, multiple schools, a hospital, and a business center. The average price per square metre is $5,700.

In Abu Dhabi, there are also several popular tourist areas. The most in-demand ones include:

• Al Bandar Island with a marina, yacht club, restaurants, and retail outlets. The average price per square metre of housing is approximately $4,000.
• Yas Island is a popular destination for active enthusiasts. It features several amusement parks, a race track, a massive mall, a water park, marina, golf course, and more. The average price per square metre is $3,700.
• Saadiyat Island is a large island with museums, art galleries, a golf club, excellent beaches, and other amenities. The price per square metre is also around $3,700.

Infrastructure projects related to tourism growth

Since tourism is one of the important sectors of the economy in the United Arab Emirates, the government of the country is committed to developing projects aimed at creating ideal conditions for holidaymakers. New hotel and recreational complexes are being constructed in cities, along with entire areas featuring artificial water bodies and excellent beach infrastructure.

Among the projects aimed at tourism development, the following can be highlighted:

• Palm Jebel Ali, the second palm-shaped island, which is currently under active development. Elite hotels, villas, residences, spa resorts, and beach facilities will soon be available here.
• Dubai Islands, a developing community consisting of four interconnected islands in the Persian Gulf. These islands will feature both residential and hotel complexes, as well as beach clubs and cultural centers.
• The World Islands, an elite project consisting of numerous small islands with residential and hotel complexes.

Forecasts and the future of the real estate market in the UAE

A stable economy, the construction of new resorts, and modern eco-friendly residential projects attract expatriates and tourists from around the world to the Emirates. For several consecutive years, real estate in the UAE has been appreciating in value.

Dubai is the most popular city for leisure and living, with tourism being one of the pillars of its economy. Local authorities aim to transform the emirate into the best city in the world for travel within the next 10 years.

According to experts' forecasts, property prices in this city are expected to increase by 15% in 2024. One of the factors positively influencing the market is the city's attractiveness for living and leisure due to its high-quality infrastructure and urban development. Additionally, the rise in apartment and house prices is driven by a high percentage of foreign investments and demand exceeding supply.

To find an interesting real estate option for investment or personal use, you can visit the catalog on our website. You will find numerous offers for the sale of properties in the most popular resort areas of the UAE. Using filters, you can set the desired price range, area, and location of the property. Convenient search options and consultations with our specialists will help you make the right choice and purchase quality housing at a favourable price.