The Rise Of Luxury Real Estate In Dubai

History

Dubai When it first went freehold in 2002 and 2003, the market's mantra was "building luxury." Dubai does things big, luxuriously, and nicely because they used to believe that the only people who would ever want to come to Dubai and live some desired luxury That was the mindset, and it kind of sold, but there are always people of all categories, such as first class, business class, and economy class. Previously, it was assumed that Dubai only built luxury homes.

However, they realized that not everyone could afford such a luxury. So, they began changing, but they built what they built under the guise of luxury. They will call the apartment ultra-luxury, but the price is lower. During that time, the Dubai market didn’t have a proper understanding of the luxury market, and things were just moving.

What about luxury after 2013? What’s going to happen should continue because what happened is that all the luxurious buildings that had been delivered were not up to the luxury standard of the world at that time, or they didn’t perform that well in terms of rental income or people staying there, meeting expectations plus Dubai reasoned:

Let us build affordable housing so that people can manage their rent and businesses can pay good, decent wages to their employees.

From 2015 on, it was more like "oops luxury," because a luxury apartment with high service fees would net you 3% to 4% net rental income, whereas a regular market apartment would net you 8% to 9%. So, those who bought in luxury are like, "Why did I bother to buy?" Because luxury rental returns are so low, buyers are less likely to spend a lot of money.

During that time, if a person needed to sell, they had to sell at a lower price, especially by 2015–2020. The luxury sector in Dubai suffered a lot.

Post Covid Situation Of The Luxury Real Estate Market In Dubai

By November 2022, the market will have flipped. Ultra-high-net-worth individuals are coming from around the world, and there are so many because post-pandemic Dubai handled the pandemic very well. Because the pandemic was handled so well, ultra-high-net-worth individuals are migrating to Dubai; these individuals are very discerning, and they put a lot of pressure on the luxury available in the market, which included villas and even apartments. Prices started going up; sales and rent prices were both increasing at a high rate.

So, they ask, where is the luxury Dubai real estate?

There is a concerted effort to start building branded residences in Dubai like the W, Saint Regis, Atlantis, the One and Only, and many more. Something classic is going to happen to the Dubai market, as it does to other markets. When demand exceeds supply, how do they manage supply in Dubai? At some point, supply will correct itself, meet demand, and then overshoot demand.

For example, Mr. X launched 100-150 branded residences in Dubai, which most developers will try to do, but that does not guarantee that there will always be a buyer, so what happens next is that the developer will be able to make a good investment for the next three to five years. According to my overview and indebted knowledge, Dubai's real estate demand will rise in the coming years.

The luxury real estate market in Dubai has been booming since the pandemic struck, even though the global economy may be in a depression. "Prices for apartments begin at $15 million and increase from there."

It was all over the news that the big billionaire of India, Mukesh Ambani, had bought a villa in Dubai for his youngest son for around $80 million. This will give a big boost to the luxury real estate market. Many big millionaires invest their money in a luxury properties.

According to last year's report, an unknown person paid $302.5 million for a mansion on Palm Jumeirah Island. It doesn’t stop here. The owner of the Great Reliance Group has paid $163 million for another villa on a palm-shaped island. The nature of billionaires' interest in Dubai real estate is a difficult challenge for developers.

Current Scenario With 2023 Prediction

In the month of September 2022, According to Knight Frank's global index report, in September 2022, real estate had really improved by 70.3%, with the main focus being on expensive city residences, frequently in the top 5 market values.

This is far greater than the index's increases of 2.5% for London, 8.9% for Paris, and 7.3% for New York, where deals have been slowed by the increase. The demand for luxury homes and villas will be high in 2023. As per the report released by Knight Frank, "the luxury market will be expected to grow further in 2023 by 13.5%."

Imran Farooq, chief executive officer of Samana Developers, said the Dubai luxury property structure will always force wealthy investors to invest due to its outstanding infrastructure.

Farooq told the Khaleej Times: "People who left Dubai during the pandemic are going to come back and settle in Dubai with their entire family bit by bit." Not only first-class travelers, but people in general, are flocking to Dubai. and this will have a great impact on luxury real estate.

Following the Russian-Ukraine war, people feel the need to relocate to a safe city, such as the UAE. Because the UAE has no income tax, Europeans are considering relocating to Dubai. This movement from different countries will benefit the luxury real estate.

In addition, the golden visa and flexible visa concepts will be huge achievements for growing the luxury real estate market in Dubai.

Supply in Dubai for the property is not meeting the demand. The government of Dubai should take more initiative to upgrade the market and make new projects, including apartments and villas. If the authority does not take a proper look at supply, the leases will shoot up and around, which could make sustainability a challenge. If they meet the demand of the market, then life will move smoothly.

Conclusion

The DLD report on the growth of luxury real estate in October 2022 was $25.31B. People have mentally decided they want to make Dubai home. They want to make Dubai the place where they want to live. Accessibility is simple, infrastructure is phenomenal, and everything is electronic.

Overall, demand for luxury real estate is increasing and is expected to increase in 2023. As a middle-class sector, disposable income is rising, and they will be interested in investments in high-end villas and homes. If the market continues in this manner, with supply exceeding demand, the price of a higher-end luxury home will be in high demand. With the increment of the market, the Dubai (UAE) authorities need to bring about changes in the department, so the eagerness in the market keeps growing.