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The International Monetary Fund (IMF) indicates that by the end of 2023, the rise in property prices in the UAE has set records for both the country itself and in comparison with other leading real estate markets globally. The Arab Emirates are among the top ten fastest-growing real estate markets globally, with price growth surpassing pre-pandemic levels. The annual price growth in 2023 for the UAE was 10.4%, with growth reaching 14.1% compared to the pre-pandemic period. In the mentioned list of countries, the Arab Emirates rank 6th in terms of price growth. The record price per square metre at $3,725 has surpassed the country's previous record set in 2014.
The price growth over the past few years is explained by the abundant influx of foreign professionals into the UAE, high demand for real estate from affluent expatriates, and international investors. However, the housing supply has been unable to match the population growth; last year, nearly 50,000 new units were put into operation, but the population grew by 100,000 people. The shortage of supply in the luxury and ultra-luxury segments of the market is particularly noticeable. This is pushing prices for villas and penthouses to historical highs.
The IMF noted price growth in housing in advanced economies worldwide, including most EU countries, as well as in developing countries in Africa and the Middle East. Prices are 10-25% higher than those on the market in the pre-pandemic period. The impact of high interest rates on lending is seriously affecting markets and hindering access for a colossal number of people. In the first half of 2023, mortgage rates in advanced economies increased by more than 2% on an annual basis. Considering the still high housing prices and elevated interest rates, the situation with people's access to housing is becoming increasingly tense.
There are exceptions, though. For example, countries like Australia, Canada, and New Zealand have experienced a significant decline in real housing prices, likely due to a high number of variable-rate mortgages in the economy. Moreover, prices in these countries are still lower than those recorded before 2020. In some advanced economies, housing prices have even fallen by more than 15%. Nevertheless, in 2024, the global market may face cooling and a shift in trends that will lead to a reduction in prices to the levels of 2021-22.
