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The Prime Residential World Cities Index report shows that Dubai outperformed the international premium real estate markets in 2022, with an average capital evaluation of 12.4% compared to 3.2% in the top 30 global cities.
The emirate is one of the most popular real estate markets in the world, thanks in part to Dubai, where the average capital cost of a residential property reaches $7,884 per square meter.
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Increase in capital housing value
With a predicted price growth of 7.9% in Dubai's prime locations, the emirate, ranked number one in the Savills Prime Residential World Cities Index for 2023, will continue to see steady growth in residential capital value.
Regional centers in Dubai and Singapore are forecast to lead global price increases in 2023. While the number of wealthy people in these cities will continue to grow, they will not be able to escape higher interest rates and adverse economic factors.
Price growth in Dubai is expected to be between 6% and 7.9%, lower than the 12.4% increase recorded in 2022. This is due to deferred demand from domestic and foreign buyers, a lack of high-quality real estate offers, and an influx of solvent individuals, companies, and family offices.
Rent payments outpaced capital cost growth
According to the expert company, the lack of affordable housing options and increased demand have seen the average cost of rent rise by 5.9% in 2022. Capital cost increased by an average of 3.2% over the same period.
Rising rental prices have been attributed to the return of residents to cities and the lifting of pandemic-related restrictions, while a sharp increase in interest rates has influenced more people to choose to rent housing, adopting a wait-and-see attitude.
With a steady stream of buyers last year, attracted by Dubai's climate, quality of life and business environment, the city recorded a 22.9% increase in rental prices.
ROI in Dubai in 2022
The global market saw an average return of 3% in 2022, with Dubai seeing the highest margin (+60 bps, to 5.3%) and a significant increase in foreign tenants, pushing average returns above pre-pandemic levels.
It is expected that price growth in many global luxury real estate markets will slow down, by an average of 0.5% in 30 cities of the world included in the index of the consulting company Prime Residential World Cities Index.
A sustained slowdown in economic growth, higher interest rates and continued inflation will weigh on real estate performance in prime residential areas. However, there is still room for growth in Dubai thanks to stable housing demand and lower cost per square meter of luxury real estate compared to other international markets.
