Dubai’s real estate market is poised for an 8% price surge in 2025, primarily driven by a shortage of housing supply, according to Knight Frank. The firm’s recent analysis, Dubai Residential Market Review: Special Edition, highlights an ongoing real estate boom, with house prices across the emirate now standing 19.9% higher compared to the same period last year. This growth reflects an extraordinary surge in property transactions throughout 2024.
Record-Breaking Property Transactions
The study reveals that Dubai recorded 47,269 real estate transactions in Q3 2024, marking the largest quarterly figure in its history and a 41.8% increase compared to Q3 2023. Between January and September 2024, property deals reached a staggering AED 306.3 billion ($83.4 billion), a 36% rise over the same period the previous year. Q3 alone saw transactions totaling AED 116.8 billion.
“Relentless demand continues to drive house prices upward,” said Faisal Durrani, Partner and Head of Research, MENA. In Q3 2024, prices in the mainstream market grew by 4.3%, contributing to the 19.9% year-on-year increase citywide.
Declining Property Listings and Luxury Market Growth
Dubai’s housing market is witnessing a sharp decline in property listings, down by 30% compared to last year. At the same time, luxury home sales have tripled in the past 18 months, with nearly one in five homes listed between June and September being sold. The share of properties valued at over $1 million has risen dramatically, increasing from 6.3% of total sales in 2020 to 18.1% in 2024.
“This essentially means that almost one in five homes in Dubai is now worth over $1 million,” Durrani noted.
Anticipated Slowdown in Price Growth
Despite the robust growth, Knight Frank predicts a more modest rise in home prices in 2025, with increases expected to taper to around 5%. For Dubai’s prime residential market, values are projected to close 2024 with a 5% increase, aligning with earlier forecasts. This comes after substantial growth of 44.4% in 2022 and 16.3% in 2023.
Supply Challenges Persist
Knight Frank estimates that approximately 300,000 new residences will be delivered in Dubai by 2029, with apartments constituting 80.1% of the supply and villas comprising 17.4%. However, the shortage of villas remains a concern, with only 8,900 new villas expected by the end of 2024 and an additional 19,700 by the end of 2025.
“Dubai will need between 37,600 and 87,700 new homes annually by 2040 to accommodate an anticipated population of 5.8 to 8.6 million,” the report stated. Historical delays of up to 30% could reduce actual completions to 35,000 homes per year, potentially leading to a long-term housing deficit.
Petri Mannila, Partner and Head of Prime Residential UAE, highlighted the limited availability of prime sites in Dubai, which is driving up prices for off-plan properties. Older, refurbished homes in the secondary market are also experiencing significant price growth.
While supply-demand imbalances are expected to support long-term price growth, Knight Frank warns of macroeconomic risks, including global economic slowdowns, oil price fluctuations, and competition from emerging cities like Riyadh, which could influence Dubai’s residential market trajectory.
Published on: Dec 5, 2024
Source: https://www.propertynews.ae/uae/dubais-property-prices-are-expected-to-increase-by-8-in-2025-due-to-a-short-supply-of-homes/
