The MD of Espace Real Estate discusses why investing in Dubai's real estate market is appealing: high rental yields, demand for luxury houses, and return on investments.
Demand for homes will remain high as more resident visas are granted
In 2024, the supply of dwellings will still have to keep up with the demand. Over 422,000 people have reportedly moved to Dubai in the last five years, accounting for 13% of the city's total population growth, and this trend appears to be continuing.
In my opinion, Dubai's economy will be able to continue thriving, which will support the city's population expansion, as the world economy emerges from this inflationary cycle. Therefore, over the next five years, there will be nearly half a million more individuals looking for housing if the growth rate we have witnessed since 2019 continues.
Dubai will remain resilient, and investment will continue flowing in
Dubai's worldwide economic resiliency will keep the city in the public eye until 2024, and investment will continue to come into the city. The market for continuous business expansion will be supported by the continued increases in direct foreign investments. This will have a favorable knock-on effect on the UAE labor market, which will fuel additional population expansion. Together, these conditions will only serve to strengthen Dubai's reputation as an exciting and successful location for business and investment.
Central communities could appreciate further
Historically, the number of transactions in more reasonably priced communities like Mira and Mudon has increased yearly. Property values in these formerly farther-flung locations are predicted to rise as a result of the recent uptick in transactions. This change, in my opinion, will make the difference between the most desirable neighborhoods and those a bit further out of the city less, which will lead to a new round of price increases in Dubai's established neighborhoods.
Ultra-luxury real estate sales in Dubai will continue to boom
When compared to lesser price ranges, Dubai's ultra-luxury house sales saw the biggest increase in year-over-year transaction activity in the second half of 2023. And there's every reason to believe that demand will continue.
Since the pandemic, Dubai's overall lifestyle offering—which includes some of the lowest crime rates in the world, cutting-edge infrastructure, first-rate healthcare, zero percent income tax rates, a business-friendly economy, and not to mention sun, sea, and sand—has improved, making the city more appealing to ultra-high-net-worth individuals (UHNWIs) from around the globe.
Interest and mortgage rates are likely to fall – but we may be waiting until H2
Interest rates in the US and the UAE will eventually change as a result of disinflation. Expectations that loan rates will drop during H1 may be exaggerated, despite the fact that real estate buyers are undoubtedly anticipating this news with great eagerness. There is now a greater likelihood that any decrease won't be noticed until the summer, at the latest.
In terms of mortgages, some banks started to offer lower rates during the first week of January.
The lowest three-year fixed rate mortgage deal available in Q4 2023 was 4.24 percent; however, a bank is now offering a lower rate of 3.99 percent.
More tenants will consider home owning as rents remain high
Rental rates will probably continue to be high in 2024, which will be a big incentive for consumers to choose homeownership over renting. Many residents of the city who have lived there for ten years or longer view UAE as their permanent home.
We anticipate the trend of tenants turning into buyers to continue, especially for larger houses where monthly mortgage payments are frequently lower than rent.
I predict that end-user demand will continue to be strong through 2024 and that the real estate market will be driven by long-term buyers for many years to come.
Rent versus buy case study
Recently, one of our tenants approached us when they were prepared to investigate purchasing a home. A young family who have been in Dubai for ten years was renting a two-bedroom apartment in Dubai Marina for Dhs155,000, a substantial amount more than they were paying just a few years prior. They were able to pay the Dhs550,000 deposit and other costs required to purchase their ideal home, a Dhs2.4 million townhouse in Villanova, thanks to the savings they have accumulated over many years.
There are two key reasons this is a wise decision:
A) The family's monthly mortgage payment is less expensive than their previous rent payment. Dhs130,000 (interest and capital) as opposed to Dhs155,000 for rental expenses.
B) They were able to expand to a three-bedroom villa with a maid's quarters and take advantage of several extras including a garden, a pool in a lovely community, and more.
News Source: Gulf Business