Real Estate

Dubai D33: Agenda Of Growth – Market Overview, Long-Term Outlook

Christian Atzert 7 September 2023


Off plan vs secondary market – no signs of overheating
We have stated previously and the presently available transaction data proves that Dubai`s third market cycle is characterised by a dominance in real demand of end users and second-home buyers. 

This was profoundly different in 2009, on the eve of the global financial crisis and preceding the stark correction in Dubai`s property market. At that time, the off-plan segment was dominating secondary market transactions, representing 61 per cent of all property sales. Whereas development activity has indeed picked up in the recent years on the back of returning demand and the influx of expats, 2022 saw a proportion of only 44 per cent of off-plan sales against 54 per cent in secondary market transactions, a figure in line with the 10-year average. 

Stability as a new paradigm
Without a doubt, however, the dominance of real property demand and its stability is a rather new phenomenon in Dubai`s marketplace.

While Dubai had been experiencing a series of economic cycles characterised by high volatility in population, economic output and – in turn – property prices, the Emirate`s policies with respect to visa and company ownership regulations seem to have fundamentally transformed the demand metrics. 

Further supported by a more stable political environment in the greater MENA region and combined with political and economic turmoil in European and other First World countries, expats are more likely to call Dubai their home for much longer than before, if not until retirement or even beyond.

At the same time, a number of factors such as Dubai`s early reopening after the pandemic and the UAE`s progressing integration into the BRICS group of countries is likely to have attracted a sizeable number of new investors and immigrants from practically new source markets, namely the US and Canada.

Remarkably, but certainly due to the factors mentioned above, Dubai has not seen a slowdown in economic activity like the European and North American economies. 

As a result, Dubai`s real estate market is increasingly exhibiting characteristics of a mature market, showing stability in demand and supply, leading to a higher resilience against exogenous shocks (i.e. rising interest rates).

International survey amongst HNW individuals with remarkable results
A worldwide survey, recently conducted by Knight Frank amongst high net worth individuals, has prompted some eye-opening insights into the strong appetite for Dubai properties within this cash-rich clientele. 

Specifically, 90 per cent of the respondents from East Asia have expressed an interest in investing into residential property in Dubai while their peers from Europe/the UK (55 per cent) as well as North America (50 per cent) have also exhibited a strong appetite for Dubai properties. Some 40 per cent of the HNW individuals stated that their purchase would be purely for personal or second-home use while 60 per cent would see their acquisition as an investment. It is an obvious assumption and noteworthy therefore that a substantial percentage of properties purchased by this buyers' group would not be made available in Dubai`s rental market.  

We have reason to believe that the tendency of a weaker US dollar will increase the budgets (denominated in dollar/Dirham) and possibly accelerate the decision-making of investors towards their property acquisition within the Asian and European jurisdictions, thereby driving more capital into the Dubai market. 

On the back of forward-looking policymaking by the government combined with favourable geopolitical shifts and notably a weaker dollar, Dubai`s growth is accelerating, progressing on its path to evolve into one of the world`s leading business, finance and tourism hubs. 

Despite the recent price hikes, we see substantial further upwards potential if Dubai`s game plan is to play out over the course of the coming decade. 

Moreover, as properties in tier-2 locations and qualities have only undergone a fraction of the price appreciation compared with the high-end segment, we see significant investment opportunities to be seized by smart investors. 

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