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Mashreq, one of the oldest private banks in the UAE, said in early April that Dubai luxury real estate market is facing a serious shortage of properties for sale.
Due to the record demand for elite and premium residential real estate in the Arab Emirates in 2021 (especially for villas in Dubai), such a development of the situation was expected. The villa segment occupies only about 13% of the residential real estate market. The share of luxury villas on the market is even lower.
Apartments account for the remaining 87% of the market, but a very small part of them can be attributed to the premium segment, and penthouses occupy an even smaller share.
Prices for luxury real estate in the UAE increased by 44% in 2021. At the beginning of 2022, a record price increase was recorded for the entire period starting from August 2021. In January of this year, a record monthly growth in the volume of real estate transactions was also recorded — 2.1%.
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The luxury real estate market experienced healthy demand from buyers throughout 2021.
Fleeing Eastern European investors bring huge amounts of money to the UAE market, especially Dubai, buying up everything that the market offers and spending tens of millions of dollars on transactions.
Such demand leads to an intensive increase in prices. However, this growth may worsen in the near future due to additional macroeconomic risks:
- Continued growth of interest rates on lending in the UAE;
- Risks of inflation in the economy and in the global real estate market;
- Disruptions in global supply chains;
- Shortage of building materials and increase in prices for them;
- Geopolitical uncertainty and foreign policy risks.
The latter include not only the current Eastern European conflict. The armed conflict of the coalition of countries led by Saudi Arabia and the current Government of Yemen is also in an active phase.
The UAE is part of the coalition, which makes the Emirates a target for attacks from Yemen. Since the beginning of the year, several drone attacks have already been carried out on the territory of the Arab Emirates.
At the same time, the UAE is in the same coalition with the United States and is increasingly expressing dissatisfaction with America's position on a number of issues at once.
On top of that, the Arab Emirates is increasingly associating itself with China, Chinese investors and foreign direct investment from both private investors and the state. The latter, as you know, is in extremely tense relations with the United States.
Even if the price growth for premium real estate in the UAE and real estate in general stabilizes in the coming months, it is still not easy to predict what the future holds for the market in the next few years.
На чем держится рынок недвижимости ОАЭ
So far, buyers are ready to purchase real estate, even despite the rapid rise in prices. This is partly due to the desire to have time to buy a property before the next wave of mortgage interest rate increases.
An important role is played by the already mentioned influx of wealthy foreign investors from Europe, who are ready to spend a lot of money on wholesale purchases of elite facilities.
Стабильность и безопасность как инструменты маркетинга
The most important role in the current growth of the UAE as a world leader among real estate markets and the most attractive investment market is played by the competent marketing of the country based on its two key achievements:
- Extremely successful fight against COVID-19;
- Creating a favorable economic situation, a «quiet bay» for large investors from all over the world.
More than 90% of the country's population is fully vaccinated, vaccines are available not only to citizens, but also to foreign residents. The healthcare system built from scratch effectively uses investments and qualified specialists from Western countries.
Economic attractiveness is based on legislative reforms that make the UAE more profitable for large foreign investors and corporations.
We are talking about new visa regimes, simplification of the process of buying real estate, new business opportunities outside of special economic zones. There is an active development of the special economic zones themselves.
Until recently, the focus was also on World Expo-2020, which ended on March 31, 2022. At the moment, the UAE, and especially Dubai, are rapidly turning into the world capital of cryptocurrency.
Новое предложение на рынке
According to current data from leading analysts of the Emirates real estate market, a large number of new properties are expected to arrive in 2022-25. Villas will make up 15% of their number.
With the completion of Expo-2020, the areas that were built for the World Exhibition will be converted for use within the new residential and commercial district — District 2020.
By the end of 2021, about 37,000 residential properties, including 5,900 villas, have entered the Dubai market. A similar number of objects were planned to be put on the market in 2022. However, these plans have now been put on pause and will be revised due to the changing macroeconomic situation.
In the short term, the UAE in general and Dubai in particular are in a good position. In the coming year, we should not expect serious problems in the market. But the longer it takes to forecast the development of the local housing market, the more uncertainty arises.