Dubai real estate market records more than AED 61B (USD 16.6B) in property sales and purchases

In spite of inflation concerns, Dubai witnessed a total of AED 61.9B (USD 16.8B) worth of transactions between January and May, as reported by the global property consultant; Knight Frank. As well as this, the expected rebound of GDP in Dubai and Abu Dhabi is set to increase by more than 6% in 2022, based on the data from Oxford Economics. According to Faisal Durrani, Partner and Head of Middle East Research at Knight Frank, the government has been succeeding in containing inflation in the UAE thanks to the pre-emptive stealth move to freeze the cost of 11,000 basic goods, including meat, poultry, bread and milk. As well as that, the surge in crude oil prices is set to bolster the economic growth in the UAE.

When commenting on the situation of Dubai’s real estate market, Durrani said:

For the residential market, however, the bulk of deals at the top end of the price spectrum are cash purchases, in large part due to the unrelenting influx of ultra-high net worth capital targeting Dubai’s most expensive homes. So, with cash remaining king, the risk to the housing market is low for now. With house price growth in Dubai this year expected to hover at around 5-7% for the mainstream market and 12-15% for the prime markets, residential property in the emirate is still an excellent inflation hedge.

At the same time, mortgages account for 18% of the local property market by value, as of Q2 2022, as reported by Knight Frank. To be more specific, until the end of May, Dubai recorded nearly AED 38B (USD 10.3B) of financing, which encompasses all real estate asset classes. Taking into account this figure, the current year could witness the second highest level of mortgaged transactions in the last 5 years. The main issue is for banks to endure the present expansion of the market.

As stated by Ashley Bayliss, Partner-Head of Mortgage and Debt Advisory, Knight Frank, the increasing inflation rate is not supposed to affect Dubai’s residential property market to a large extent. In fact, Bayliss said the following:

The UAE’s fiscal policy correlates with the US, and the recent 50 basis point hike in interest rates to 2.25% does mean higher outgoings for mortgaged households going forward. However, it remains comparable with other international prime markets.