Dubai’s Real Estate Market - Why and How to Invest?

There is a massive growth in Dubai's real estate, but the data tells an even deeper story. In 2024, 37% of total transactions were for ready properties, accumulating to 8,290 transactions, which represents a 34.2% year-on-year growth. 

This tells us two key things:

• Ready properties are high in demand: The resale market is thriving, with more and more investors and buyers snapping up completed properties. 
• Investor confidence in off-plan developments is rising: Investors are increasingly getting confident in off-plan projects, believing that these properties will offer high returns once completed. This growing confidence is further confirmed by the 2024 data, which reveals 110,000 new investors have entered Dubai's real estate market in the year. This trend paints a picture of a market with strong fundamentals attracting both home buyers and investors alike.

But the real question remains: Is it still worth investing in Dubai today? To understand that, we need to take a look at where the market is headed.

As of December 2023, Dubai’s real estate market had reached an all-time high in pricing, surpassing the previous peak achieved in 2014. Naturally, when prices hit this point, there was a concern in the minds of many, and they chose to declare that this is where it tops and the market will soon begin to decline. But over a year later, prices have risen by another 20%.

So, why are investors still diving into the market when we have already crossed the previous peak? The answer lies in some fundamental changes that Dubai has experienced since 2014. Advancements that make the city unrecognizable in the best possible way. 

The five prominent changes that have shaped Dubai over the last decade:

1. Expo 2020 and Global Attention:

In 2014, Expo 2020 was just a dream. Fast forward to today, Expo 2020 has become a reality, attracting 24.1 million visitors from 192 different countries and putting Dubai firmly on the global map.

2. Population growth:

Dubai's population has surged by 61% from 2.35 million in 2014 to 3.8 million today. Even more remarkable is the rise in the number of millionaires, with the number of high net worth individuals increasing by 178%, reaching over 72,000 millionaires living in the city today. 

3. A more business-friendly Dubai:

In 2014, entrepreneurs could not enjoy 100% ownership of mainland businesses. Today, Dubai has eliminated those restrictions, creating a thriving business hub where global entrepreneurs can fully own and operate their businesses. 

4. Dubai is a tourism powerhouse:

Its tourism industry has nearly doubled since 2014, further solidifying its position as a global hotspot for travelers and investors. Dubai now offers a variety of visa options, like golden, blue, and green visas and more, attracting global talent and investors. As of 2024, the city has issued 1,58,000 golden visas, fueling the city's future growth. These advancements in Dubai, along with the wider UAE economy, are propelling it forward.

5. Its position as a future-ready global player:

His Highness Sheikh Mohammed Bin Rashid Al Maktoum recently called 2024 the UAE's most remarkable year for economic growth, with over 140 international agreements signed in sectors such as sustainability, technology, and clean energy. Dubai is. Moreover, 2,00,000 new businesses were registered in the UAE, and astonishingly, 87.5% of which were owned by expats and international entities. This influx of businesses is driving job creation and will increase demand for real estate. Dubai's position as a global trade and business hub has been further strengthened by 24 economic partnership agreements.

When we compare 2014 to 2024, it's clear that the growth of Dubai’s real estate market is intertwined with the city's broader economic success. This dynamic economy is fueling the real estate market boom and ensuring long-term sustainability. 

Dubai’s real estate market is becoming more global with each passing year. It used to be heavily invested in by specific nationalities previously, but today, over 200 nationalities have invested in the market. The most significant factor driving global investments is the combination of Dubai's real estate and lifestyle offerings paired with its relative affordability compared to other major cities around the world. 

Dubai is affordable when compared to global real estate powerhouses. In 2024, Dubai's average price per square foot was 406 dollars, which may seem high at first glance. 

Let's compare it with other prime global cities to see where it stands. 

• In New York, for example primarily the estate is primarily priced at around $2,700 per square foot.
• London trades at over $2,800 per square foot, which is six times higher than Dubai.
• In Singapore, prices hovered around $2,900 to $3,000 per square foot.
• Tokyo stands over $1,500 per foot. 
• In Hong Kong, prices reached up to $4,200 per square foot. 

These numbers don't even account for the taxes and the registration fees, which in certain cases can go up to 60% for foreign buyers in some markets. 

A Comparative Study by UBS

UBS, a multinational investment bank, conducted a study comparing how many years it would take a skilled worker in each of these cities to afford a 60 square meter or a 650 square feet apartment in the city center. 

Here is how it stacks up:

• For Dubai, it would take just 5 and a half to 6 years to afford such a property.
• In New York, it would take roughly 9 years. 
• In London and Tokyo, it would take 12 and 14 years, respectively.
• It would take a staggering 22 years to afford such a property in Hong Kong. 

These numbers tell a clear story. With Dubai’s growing economy and high per capita GDP, the number of homeowners in the city will continue to rise in the coming years.

Rental yield is crucial for any real estate investment. Dubai has long been known for its high rentals and today, a property in Dubai can pay itself off in less than 10 years, which is one of the quickest in the world.

Comparing with other global cities:

• In New York, it would take around 20 years.
• In Tokyo, London, and Singapore, it would take 30, 31, and 32 years, respectively.
• In Hong Kong, it could take around 39 to 40 years.

This data suggests that Dubai offers unmatched investment potential. A well-known survey done by Knight Frank found that 44% of millionaires across the globe are highly interested in investing in Dubai’s residential real estate. Interestingly, the proportion of such people increased as their net worth increased.

This translated into market performance. In 2023, there were 431 transactions for properties worth over $10 million, and this was the highest number of transactions for such properties to be done in Dubai. In 2024, these transactions grew by 35%, reaching 582 transactions. Dubai has firmly established itself as the world's busiest market for $10 million plus homes.

To answer that we must consider the solid plans and facts laid out for the future. In 2021, His Highness Sheikh Mohammed Bin Rashid, the ruler of Dubai, introduced the Dubai 2040 Urban Master Plan, also aptly known as The Vision 2040. In 2023, the D33 Economic Agenda was unveiled. It is important to note that these plans are not the first of their kind. The 2040 Urban Master Plan is the seventh such initiative, and the D33 Economic Agenda builds upon four previous economic strategies. The success of all of these previous plans so far provides solid assurance for those who look at the past for confidence in the future, this history is a great indicator.

Key points suggesting growth of Dubai’s real estate market.

• For any market to thrive, and particularly for real estate, there must be a growing demand. Real estate demand is directly proportional to population growth, and according to the government's plans, Dubai's resident population is projected to reach 5.8 million by 2033 and 7.8 million by 2040. Currently, the population stands slightly over 3.8 million, meaning that Dubai needs an average of 2,35,000 new residents annually to meet its target. This may sound like an ambitious number, but Dubai has already welcomed over a million new residents in just under 4 years, an average of 2,50,000 plus people per year
• Dubai's demand for real estate is not just driven by the residents; the tourism sector also plays a significant role, and this is why more and more international investors are looking to take a piece of this market.
• Dubai aims to become the world's most visited city. In 2024, Dubai welcomed around 20 million overnight tourists, and by 2031, this number is expected to double to 40 million. Supporting this vision, the government is investing heavily, approximately $35 billion in expanding the Al Maktoum International Airport, aiming to make it the largest in terms of capacity as well as cargo, and the target of passenger capacity is 260 million passengers annually.
• Alongside this, Dubai is positioning itself as a 10-day tourist destination, which means it will undoubtedly boost the occupancy rates of hotels, holiday homes, and airbnbs, which will further strengthen the real estate market. 
• Moreover, we also have the region's first casino opening up in Ras Al Khaimah at the Al Marjan Island known as the Wynn Casino Resort, which is around an hour's drive from Dubai. Once ready, the casino will become a Top Choice for people from wider Asia, Russia, and Europe, all of which are just under 8 hours of flight time to Dubai.
• Recently, we have seen a surge in interest from investors belonging to these countries and these regions which would continue to rise as more and more people continue visiting the city.

For the real estate market to maintain its momentum, the economy must continue to grow in a way that enables new arrivals to afford both rental as well as purchase options. Dubai sits among the top 10 cities when it comes to the number of millionaires and centi-millionaires. The number of centi-millionaires is expected to increase by 150% by 2040. The government plans to double Dubai's economy by 2033, with trade, logistics, and tourism being the primary contributors to this growth. But it's not just about growth, Dubai is building an economy for the future initiatives like sustainability projects, smart cities, and cryptocurrency laws that are positioning Dubai as a global hub for innovation and business. This isn't just a city growing for growth's sake; it is a city with a forward-thinking vision for long-term relevance.

Let's explore how to select the right investment by breaking it into three considerations:

Ready v/s Off-plan investments

When entering the market, one of the first questions on every investor's mind is whether to go for a ready property that will generate immediate rental income or an off-plan property that is still under construction. For many investors especially those who are international investors and have just started exploring the real estate opportunity in UAE, the concept of buying off-plan or under construction properties is unique to them. Off-plan properties may not generate immediate returns, but they allow for more strategic investment as well as various options to grow wealth over time. In Dubai, the off-plan market is particularly strong, with 63% of all transactions in 2024 being off-plan properties. 

• There are several reasons why people choose off-plan investments:
• Better pricing compared to ready properties 
• Interest-free payment plans 

Newer developments with modern designs and new trends offer better lifestyle options that attract higher rents as well as higher resale values.

Now let's look at some numbers to get an idea. For example, a two-bedroom ready apartment in Dubai Hills Estate is priced between $1.1 million to $12 million today, which offers an annual rental income of $63,000, which is a 5.2% yield, meanwhile a similar off-plan property of a two-bedroom apartment in a project called Hills Edge in Dubai Hills Estate is priced at $780,000 to $790,000 which is 29% lower than the ready property price and if the rent prices in this area of Dubai Hills Estate continue to rise at just 10% per year over the next 4 years instead of the 17% year- on-year growth over the last 3 years, once the off-plan property is completed, it would generate a rental yield of over 11%.

Top Areas and Trends

The next thing to understand is what property type should one invest in. To understand this, it is crucial to see the demand and supply trends, that is essential for making an informed investment decision. The current market supply of ready properties shows that villas comprise 6.7% of the total supply, and townhouses comprise 7.9%, and clubed together, they are 14.6% of the total supply. If we look at the property supply, which will get handed over until, let's say, 2030, Villas would still have the smallest proportion at 6.5%, and townhouses would jump up to 12.8% of the total supply and combined this still sits at less than 20% of the total market supply. 

To make this even more interesting, the recent demographic shift in Dubai's population shows that more and more families are moving to Dubai and calling it home, therefore, the demand for larger houses is also substantially increasing. Over the last couple of years, major developers have announced many new launches within this segment of townhouses and villas, but the number remains low. Unlike apartments, for villas and townhouses, developers must create entire communities, not just standalone projects, and to be able to provide the lifestyle that the residents crave for it takes a lot of time and effort. 

Within both the villa and townhouse segment, there are multiple offerings, but the top considerations are:

• The Valley - A phenomenal master plan being developed by the largest developer, Emaar and it is being built with family living at its core.
• The Acres - A master plan which is lead certified, focuses on sustainable and green living and provides a very interactive community living experience.
• Oasis by Emaar - The epitome of luxury living coming up towards the south of Dubai, which will eventually become the center of luxury living in Dubai. 
• Palm Jebel Ali -  Waterfront living in Dubai does not get better than Palm Jumeirah, which is a fact and now the same concept at a larger scale is coming up at Palm Jebel Ali. 

There are some phenomenal investment opportunities in the apartment segment as well, but in this segment, selecting the right property becomes even more crucial. For apartments, the basic premise is to go for projects in master communities wherein either all of the supply or the majority of it is controlled by one particular developer because a large-scale reputable developer would never bring in too many properties within one particular area unless there is enough demand for it. In a multi-developer area, supply is within the hands of multiple developers, and each developer has their benefits to look at. So, when it comes to apartments top considerations are:

Maritime City by Omniyat - A highrise waterfront destination within the heart of Dubai, offering a rainforest vibe within the sea. 

Rashid Yachts and Marina - Sitting right across Maritime City, this low-rise residential community by Emaar is a Riviera-themed, family-friendly community, the first of its kind in Dubai.

Dubai Creek Harbour - Those who missed out on the opportunity of investing in Downtown Dubai in the early 2000s can be glad that an opportunity of the same magnitude still lies within this city and close to the Downtown.

Dubai Hills Estate - It has been an investor and homeowner favourite post-COVID and continues to be one of the most transacted communities in Dubai.

Expo City - Towards the south of Dubai, this is a community unlike any other and offers great investment opportunities as this would become the financial and exhibitions district of Dubai in the future, similar to what we see in the DIFC and the World Trade Center area today.

Emaar Beachfront - The Little Miami of Dubai.

Palm Jebel Ali - The successor of Palm Jumeirah 

Developers to consider

There are more than 350 registered developers operating within Dubai's market, and this number continues to grow; hence, new developments come to the market regularly, therefore differing pricing structures, payment plans, and product types are being offered to the market and clients are being attracted to all of these offerings. However, selecting the right developer in this entire process is of utmost importance. 

One must assess the history of the developer, their reputation, reliability, and investment potential it offers and has been offering to its investors since day one. It is always safe to work with developers who abide by the government, as this gives an added sense of security to the investors. 

Let’s take a look at some of the wel-renowned and notable developers:

EMAAR PROPERTIES

Emaar, which without an inch of a doubt is the biggest developer not just in Dubai but in the world outside China. Emaar was given the responsibility by the government of Dubai to start the freehold real estate market, and if the government chose this developer as its Beacon, then one must not ignore them at any point. To date Emaar has produced multiple master plans and communities which are rated highly by investors from across the globe. Some noteworthy developments would include Emirates Living, Arabian Ranches, Dubai Hills Estate and Downtown Dubai and the Burj Khalifa.

DUBAI HOLDING

Dubai Holding now comprises Nakheel, the creator of Palm Jumeirah and the upcoming Palm Jebel Ali and Dubai islands. It also comprises Dubai Properties, the force behind the beautiful residential communities of Mudon, Serena, and Villanova. Meraas is the creator of the beautiful Bluewaters Island, City Walk - an urban masterpiece and the exclusive Jumeirah Bay Islands, and it also includes Meydan group, the one to bring the concept of lagoon-based communities to the city of Dubai in the form of District 1.

EXPO CITY

Another name added recently to the government-based developers is Expo City, the developer given the responsibility to create the most sustainable and futuristic living experience in the south of Dubai. 

OMNIYAT

Omniyat, a private developer that has created a name synonymous with luxury real estate in Dubai. It was chosen by Dorchester Collection as its partner to enter into Dubai's real estate and now they are venturing into planning master communities, so one could imagine the kind of community they would be putting forward.

DAMAC

Damac is a developer you can rely on if you are someone who likes to invest in different or creative concepts. As a developer, Damac has a big portfolio under its belt and caters to various investor categories.

There are some small-scale private developers, too, who are bringing great products and investment propositions to the market and offer niche projects, the top choices within this category would be Iman developers and Ellington Properties.
 
Payment structures to opt for

There are many different modes of payment available to clear off payments for properties and multiple payment instruments that can be used for ready properties. One would be required to pay in full in most cases and this can be done via cash in the form of a manager’s cheque and via bank mortgages.

When it comes to off-plan property, the payment structures could vary anywhere between paying 50% to 90% during construction and the remaining to be paid off either on Handover or over multiple years post-handover.

The payment structure that works best for you certainly depends on your cash flow and what product category you want to tap into. For example:

• If you want to be investing in projects where at no point you have a lot of upply on the resale market then, you should work with payment models wherein the majority of the payments are being taken during the construction phase, as this allows you to operate with deep pocketed investors who are committing to properties with the intention of holding onto their investments. 
• However, if you are someone who does not want to allocate too much of your funds during the construction phase, then a 50/50 or a 60/40 payment plan is better, as you would be able to finance the Handover payment through a bank if needed.
• If you are someone who wants to purchase a property without allocating too much funds during the construction period and do not want to involve a bank either, in that situation a Post Handover payment plan would be better for you.

However, in most cases, if not all, properties with such a payment structure tend to give the least capital gains but allow investors to pay off the property with more flexibility.

From the above pieces of information and insights, we can get a clear idea and can assess the strength of Dubai's real estate market to understand which investment opportunities are to be strongly considered highlighting some of the best investment opportunities in the market today. For more such detailed and valuable analyses, you can reach out to Dubai Housing, a trustworthy source providing insights on the real estate market and remarkable guidance.