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Economists indicate that the construction sector and real estate market in Gulf countries, particularly the UAE, Saudi Arabia, and Kuwait, will maintain momentum for growth in the first half of 2024. Growing demand, governmental support, and economic growth create a favourable environment for development. Specifically for the United Arab Emirates, forecasts predict a continuation of growth rates in the first quarter of the year, similar to the first quarter of 2023. This forecast is provided by Markaz, a Kuwaiti investment bank also engaged in asset management.
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Dubai remains the growth engine of the UAE
According to data from the Dubai Land Department, approximately 1.6 million real estate transactions were recorded in Dubai by the end of 2023. Year-on-year, we observe a 17% increase in sales, corresponding to a period of active economic growth in the emirate, which began two years ago. For comparison, around 1.3 million transactions were recorded in Dubai in 2022. The figures above include transactions of various types: sales to consumers and investors, transactions involving mortgage financing, and property rental contracts.
In total, real estate transactions in 2023 generated approximately $172.6 billion for the market. This translates to approximately 166,400 deals. In monetary terms, we see a year-on-year increase of 20%, with transaction volume growing by 36%. The market's condition can also be tracked through Dubai's construction companies. One such example is Emaar Properties, the largest developer in the emirate. According to information released by Emaar, the company increased its net profit by 70% in 2023, with revenues reaching around $3.2 billion by the end of December.
Market growth leads to changing trends
With such active development in the real estate market, analysts are witnessing significant shifts in established trends. Last year, we observed various changes, including the emergence of new popular destinations for expatriates, increased popularity of housing from affordable market segments, and a widening gap between the premium segment and the overall real estate market. Now, at the beginning of 2024, we see pronounced changes in the rental market.
By the end of the first quarter, we will witness the final formation of two noticeably distinct rental markets in Dubai. Experts point to a divergence between tenants who prefer to renew existing leases and those willing to enter into new ones. The latter category is shrinking and consists of more affluent individuals or new expatriates in the country. Most tend to renew current contracts, as it is noticeably cheaper in the market's realities. The annual rental rate growth in 2023 was approximately 19% across the city.
Macro-economic forecast
Numerous factors will contribute to the growth of the UAE economy in 2024, including revenues from the oil and gas sector and investor-friendly government policies. Economic growth, coupled with rising incomes and increasing migration of foreigners to the country, will allow the real estate market to maintain stability at least until the summer of this year. Challenges that could alter the balance of power include inflation and interest rates on loans; however, authorities are attempting to offset the negatives with new reforms. For example, in late January, the requirement for a minimum deposit of $272,000 to acquire property for obtaining a "golden visa" was abolished.
